The two primary types of surety bonds used for construction projects are bid bonds and performance bonds. While both can be essential to your project, it’s important to know the difference between them and why they matter.
Before you sign on for any surety bond, you need to make sure you have the knowledge required to understand what you’re getting into. Still need to know what is bid bond and performance bond? Find out in our detailed overview.
A variety of construction projects are often awarded after numerous contractors bid on them. This is especially common for government projects like schools and federal and state buildings. After the bidding is completed, a contractor will be chosen for the job and is expected to do that job to the end.
A bid bond comes into play to prevent the contractor for backing out. If a contractor is awarded a project after a successful bid, a bid bond ensures that they abide by the bid they made. If they realize that they didn’t bid enough and can’t afford the project, the client can then take legal action against the contractor thanks to the bid bond which acts as an indemnity bond.
Performance bonds are a bit different as they’re only relevant after work has already begun. This type of bond protects clients from unsatisfactory or incomplete work. If a contractor doesn’t do quality work or simply doesn’t finish the job, a performance bond allows the client to take legal action against the contractor.
For example, a construction company could fold halfway through a project. If that happens, a performance bond ensures that they’re still responsible to cover the costs to complete the project. If the completed aspects of the project aren’t up to par, the contractor will also be responsible for the corrections to the unsatisfactory work.
Why They Matter
If you want to get contracts in the construction industry, these bonds are essential to prove to clients that you’re trustworthy. In the world we live in, your word simply isn’t enough to reassure people that the job will get done correctly. Bid bonds are a great way to help you get started, but performance bonds offer the most benefits to any prospective clients.
Under a performance bond, you’re expected to complete the project with quality work. That kind of commitment reassures people, and if you build up a history of project successes, people will be more likely to issue you contracts.
Surety Bonds With NSSI
Now that you know what is bid bond and performance bond, you need to find a reliable surety bond provider to get the necessary bonds for your next project. With National Surety Services Inc, you can find the service only possible from 20 years of experience. Our service and results driven approach has lead to success with countless clients over the decades. We’re more than just a surety provider. We’re your partner in your business endeavors. Find out how we can help your next project by contacting NSSI today.