Surety Bond Professionals is a family owned and operated bonding agency with over 75 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your performance bond needs.
What Are North Carolina Bid Bonds?
Selecting a contractor through competitive bidding takes a lot of work on the part of a government contracting authority or private construction project owner. They often require bidders to furnish a bid bond as a guarantee that:
- The bid submitted by the contractor is complete and accurate,
- The contractor is qualified to purchase performance and payment bonds, and
- The contractor will accept the job if chosen as the winning bidder.
A principal who does not live up to this guarantee is legally obligated to compensate the injured party, the obligee, for monetary damages.
Who Needs Them?
Federal contracting authorities and private projects alike can require bid bonds from contractors vying for larger construction jobs. In most cases, the required bond amount is in the range of five or ten percent of the contractor’s bid price.
How Do North Carolina Bid Bonds Work?
There are three parties to a North Carolina bid bond:
- the obligee (the project owner requiring the bond),
- the principal (the contractor purchasing the bond), and
- the surety (the bond’s guarantor).
While the principal is legally obligated to pay a valid claim submitted by the obligee, the surety has guaranteed that payment by agreeing to lend the necessary funds to the principal. The surety will actually pay the claimant directly and then be repaid by the principal. Not repaying the debt according to the surety’s credit terms typically results in the surety suing the principal to recover the funds.
How Much Do They Cost?
As the bid bond’s obligee, the project owner in North Carolina sets the bid bond’s costs. Usually, 5% or 10% of the entire bid value is the required bond amount. But contractors can get bid bonds from Surety Bond Professionals at no cost. This is because the contractor will proceed with purchasing the necessary Performance and Payment (P&P) bonds through our surety in order to complete the project, should they be granted the contract.
In North Carolina, the key factor taken into account when underwriting for smaller contracts and businesses is the credit history of the contractor. However, the assurance’s underwriters might carry out a more thorough evaluation for bigger projects. This assessment may involve a more thorough examination of the project’s location in addition to a creditworthiness and stability assessment of the contractor. Normally, the total cost is calculated by accounting for these elements.
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