[TheForge] Re:Performance Bonds

[Joe Chadwick]

>
>I have been asked to bid on a job where a performance bond may have to be
>posted.

"May" or "will" ? if the bid documents you hold in your hands aren't 
explicit, get a clarification. Many times there are owner requirements that 
don't get transmitted to the supplier and all tiers of subcontractors. 
Sometimes the Prime contractor has to comply with a minimum insurance MOD 
rating for all subs. It's better to know now and avoid one more thing to 
argue about later.

>Does any one have any information on what something like this cost to
>obtain?

In my day-job I see performance (usually coupled with payment) bonds 
costing from 1% to 11% of the cost of the work. Most typically, within the 
3%-7% range. The rate is based on history, experience and bondable 
capacity. While we rarely require bonds, we always ask for the cost if- as 
an indicator of stability, workload and bondability. Some of the larger 
CM's that work for us have their own internal bonding policies so we get to 
see a fairly broad sample.


>My insurance man ran out the back door when I ask how much something like
>this cost. Wouldn't even talk dollars>

That's because construction bond underwriters are a separate species of 
insurance provider. I'll spare you my rant on the despicableness of the 
insurance industry, but look for an outfit that specializes in construction 
bonding. Bases on where you are in the construction food-chain, you should 
be a low-risk, so if your financial history is good, you should get a 
reasonable rate. - By the way - the cost of the bond is part of the cost of 
the work and shouldn't be eaten in "overhead."

Joe Chadwick,
Facilities Bureaucrat
at your service


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