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 Rhode Island Bid Bonds?
A Rhode Island bid bond serves as a contractor’s guarantee that:
- The bid submitted is complete and accurate,
- The contractor will be able to obtain performance and payment bonds if awarded the job,
- And the contractor will accept the job if selected as the winning bidder.
Bid bonds serve the important purpose of protecting a project owner (known as the bond’s “obligee”) from financial harm if the winning bidder (the bond’s “principal”) can’t qualify for performance and payment bonds or for any reason does not enter into a contract for the job. The principal is legally obligated to compensate the obligee for the resulting monetary damages.
Who Needs Them?
Rhode Island contracting authorities typically require a bid bond for construction projects with an estimated value above a certain threshold. Private project owners also may require bid bonds to protect themselves and their investors.
How Do Rhode Island Bid Bonds Work?
A Rhode Island bid bond involves three parties: the obligee, the principal, and the bond’s guarantor (known as the “surety”).
Although the principal is legally obligated to compensate the obligee for a valid claim, the surety guarantees that payment. Therefore, the surety will extend credit to the principal by paying the claim initially and then be repaid by the principal later. If the principal does not repay the debt according to the surety’s credit terms, the surety will most likely take the matter to court to recover the funds.
How Much Do They Cost?
At Surety Bond Professionals, we provide bid bonds at no cost to Rhode Island contractors. It’s crucial to realize that these bid bonds are usually granted on the condition that, should the contractor be chosen for the project, they will acquire the Performance and Payment (P&P) bonds via our surety in order to commence construction.
However, typically, the required bid bond amount is equal to either 5% or 10% of the project’s total bid value. The contractor’s unique credit history is frequently the main consideration during evaluation for smaller contracts and businesses for bonds. But underwriters might do a more in-depth analysis for larger projects in Rhode Island. This assessment may include an in-depth examination of the project’s site as well as a thorough appraisal of the contractor’s creditworthiness and financial stability. All of these elements work together to influence the bond’s ultimate cost.
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