Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your construction bond needs.
What Are They?
Oregon construction bonds serve two important purposes. They legally obligate contractors to operate in accordance with state and local laws and building codes. And they give project owners and the public a way to recover financial losses caused by a contractor’s regulatory and/or contractual violations.
What Oregon Construction Bonds May Be Needed?
Some bonds that fall into the category of construction bonds–specifically bid bonds, performance bonds, and payment bonds—are mandated by the state’s “Little Miller Act,” which applies to government-funded projects of a certain size. These bonds also may be required by private project owners.
Other commonly required Oregon construction bonds include
- Bid bonds,
- Maintenance bonds,
- Subdivision improvement bonds,
- Solar decommissioning bonds,
- Right of way bonds, and more.
How Do They Work?
The three parties to an Oregon construction bond have different rights and responsibilities:
- The “obligee” (the project owner or other party requiring the bond) establishes the required bond amount and can file a claim to recover monetary damages if warranted.
- The principal (the contractor purchasing the bond) bears the full legal obligation to pay valid claims.
- The surety (the bond’s guarantor) sets the premium rate, agrees to extend credit to the principal to pay claims, and determines which claims are valid.
The usual practice is for the surety to pay the claimant directly and be repaid by the principal. When necessary, the surety will take legal action against the principal to recover the funds.
What Do They Cost?
The annual premium cost for an Oregon construction bond is calculated by multiplying the required bond amount by the premium rate. The premium rate, assigned through underwriting, will reflect the risk of the principal not repaying the surety for claims paid on the principal’s behalf. That risk is measured largely on the basis of the principal’s personal credit score.
A high credit score is correlated with a low risk to the surety, which should lead to a low premium rate. A low credit score, on the other hand, is a sign of higher risk and should result in a higher premium rate.
A well-qualified principal typically will be assigned a premium rate in the range of .5% to 3%.
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