New Jersey School Bus Bonds
Learn everything you need to know about New Jersey school bus contractor bonds, and get bonded today with Surety Bond Professionals.
What Are They?
New Jersey requires any company awarded a contract to provide school bus transportation services to provide a performance bond. This type of surety bond guarantees that the principal (the bonded transportation company) will comply with all terms and conditions of its contract with the school board while operating in a legal and ethical manner.
By law, the amount of the bond must be at least equal to the contract amount for one year of transportation to and from school. The bond provides funds to compensate the school board or any other party that suffers a financial loss as the result of the principal’s default or nonperformance.
School transportation contracts are awarded through a competitive bidding process. New Jersey requires a bidder’s guarantee to ensure that the winning bidder will purchase a bond and accept the contract. The purpose of the guarantee is to prevent frivolous bids and make sure that funds will be available to cover the cost of repeating the bid advertisement and evaluation process in the event that the original winning bidder does not enter into a contract with the school board. The bid guarantee can be in the form of a surety bond, cashier’s check or certified check in an amount equal to a minimum of 5% of the annual cost of the transportation contract, up to a maximum of $50,000.
Who Needs Them?
Every bidder seeking a contract to provide school transportation services is required to submit a bid guarantee, which may be in the form of a surety bond. Every winning bidder is then required to submit a performance guarantee in order to enter into a contract with the school board. New Jersey law gives local school boards the right to decide whether to accept a personal surety bond or a corporate surety bond in fulfillment of the performance bonding requirement.
How Do They Work?
Every surety bond agreement includes language that establishes what would constitute a violation of that legally binding contract. Any party harmed by the principal’s violation of the surety bond contract has the right to submit a claim against the bond (bid or performance) and seek compensation.
The surety company that underwrote and issued the bond will conduct an investigation into the validity of the claim before approving payment. The principal bears sole legal responsibility for paying valid claims. However, it’s common for the surety company to step up and pay a claim on behalf of the principal and then be reimbursed by the principal.
What Do They Cost?
The annual premium you will pay for a New Jersey School Bus bond depends on two primary factors: the required bond amount and the premium rate assigned to the principal by the surety company. The surety company’s main concern is the likelihood of claims against the bond and the principal’s ability to reimburse the surety for any claims paid on their behalf. So, the primary factors the surety considers in assigning a premium rate are the principal’s creditworthiness and financial statements (personal and/or business) and prior experience in providing school bus transportation services. The higher the principal’s credit score, the lower the premium rate will be, potentially as low as 1%.
School boards also have the right to require certification that the principal’s net worth is sufficient to ensure payment of claims up to the full amount of the bond.
Get Bonded Today
Apply with Surety Bond Professionals today to get the New Jersey school bus contractor bond you need.