Top 4 Types of Construction Bonding You Need to Know About

Two parties agree to a construction plan by shaking hands while a hardhat and project plans sit in the foreground.Construction can be a complicated environment. The physical part is straightforward, but the bidding process can get confusing. Construction bidding, known as Construction Bonds, is a way for project managers and owners to ensure both parties stick to the agreed terms. These terms point out what the project will accomplish and how much time it will take to complete. These bonds often are part of the bidding process.

Keep reading to learn more about the four major types of construction bonds used during the bidding process.

1. Bid Bond

This type of bond makes sure to only include bidding parties who meet a financial requirement. In the event of a winning bid being withdrawn, the project manager has the right to file a claim on the bond. This claim will require the bidder to cover the difference between their bid and the next bid. This type of bond is an assurance for payment.

2. Performance Bond

A performance bond ensures that the winning contractor completes the project as stated in their bid and in the contract they agree to follow. If there is any aspect of the contract left incomplete, the owner may file suit against the contractor. The money gained from this suit may then be used to hire a new contractor to finish the project.

3. Payment Bond

Payment bonds take care of, you guessed it, the payments. They make sure the payment process is streamlined, even when the contractor goes bankrupt. These payments can then go to subcontractors, suppliers, or other parties who assist in bringing the project to completion. Federally funded projects of more than $100,000 require performance and payment bonds, according to the Federal  Miller Act.

4. Maintenance Bond

Not all work turns out as good as it should have - which is where this type of bond comes into play. This bond provides protection from low quality or disfunctional materials or workmanship. A timeframe of when this will be effective needs to be written into the contract. If problems are found, the money from this bond goes to repairs and replacements. 

Partnering with Professional Contractors and Suppliers

You will find these common bonds in just about every construction project. Working with a competent crew of contractors and suppliers will boost the success and timeframe of your project. Here at the Ferrante Manufacturing Company, we have brought projects together for more than 70 years. Contact us today to gain from our experience and top-quality materials produced in-house.

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