If you’re just starting out as a construction contractor in Connecticut, or have predominantly taken on private work, it’s possible that you’ve never been required to obtain a performance bond before. Many public, local, and federal construction jobs require the low bidder on contracts obtain certain bonds before beginning work, and the performance bond is a common one that you’ll encounter.
But in case you’ve never had to go through the process before, here’s some basic information about performance bonds, when you’ll need them, and what they mean for your business.
Performance Bond Connecticut: Essential Information
A performance bond is a type of surety bond that guarantees the work of a commercial contractor when working on a construction project. As a contractor, when you’re awarded a job by a developer, you may have to obtain a performance bond that ensures you’ll meet the contractual obligations of the job.
In other words, a performance bond provides a guarantee that a contractor who’s been awarded a construction job will complete the job on time and by the contract specifications.
When Do You Have to Obtain a Performance Surety Bond in CT?
A performance bond in CT is required for any federal or public job worth over $100,000, and the state also has other regulations in place that determine when a contractor requires a performance bond. When you bid on a job, you’ll likely have to obtain a bid bond that guarantees that you will take on the contract if you are the low bidder. It is also a means of prequalifying your company to ensure you are fit to take on the job, if awarded.
The Difference Between Performance and Payment Bonds
Performance and payment bonds are often lumped together because they’re both typically required in order for a public contractor to start work, but they are in fact different things. Whereas a performance bond applies specifically to the work performed by the contractor, a payment bond is meant to guarantee that the contractor will pay all suppliers, subcontractors, and laborers associated with the work performed and materials provided.
What Happens if a Contractor Defaults?
Any surety bond, including performance bonds, are legal contracts between the principal (the contractor, in this case), the obligee (the owner requiring the bond, for example, the town or federal government), and the surety company that provides the bond. Should a contractor default and not complete a job, the owner can file a claim with the surety company.
If the surety company determines that the claim is valid, then the company will pay the obligee, fund the contractor to ensure the completion of the work, or find a new contractor. The surety will look for the contractor to indemnify, or repay any losses from claims.
The amount of documentation and information you’ll have to provide to secure a performance bond will depend mostly on the size of the job, as larger jobs will require more extensive background research into your credit history and the financial status of your business.
However, obtaining performance bonds is often a necessary step in any construction project, because construction surety bonds in Connecticut protect everybody involved, including you and other contractors, the owners, subcontractors, suppliers, and even the public (taxpayer money). We provide the most competitive terms including largest surety programs, lowest rates, and ultimately the best bonding support possible. Contact us today if you need a performance and payment bond in Connecticut.