What is an Ohio Contract Bond?
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Contract Bonds or Construction Bonds are very important in the construction business. Both private and government construction projects require a surety bond.
In the case of government construction projects, the federal Miller Act requires that a bond be secured for projects exceeding $100,000.
A surety bond makes it possible for the contractor, along with a trustworthy surety bond company, to assure the construction project owner that the contractual obligations will be successfully fulfilled.
There are several types of Contract Bonds. In the State of Ohio, the surety bond required are specific to the construction project, the municipality, or the construction project owner.
The key parties of a contract bond will be the following:
Principal – The contractor who will be obtaining the bond from the surety bond company
Obligee – The owner of the construction project to whom the bond is obtained
Surety – the surety bond company that will shoulder the payment to the obligee in case the principal doesn’t fulfill his obligations
Types of Contract Bonds
A Contract Bond is further subdivided into different types. The primary contract bonds used in a construction project are as follows:
A type of surety bond wherein the surety guarantees the obligee or the construction project owner that the principal will execute the contract awarded to him.
In case of non-compliance or if the principal abandons the project, the surety assures the construction project owner that he or she will be paid for the difference between the principal’s bid and the lowest amount the contract may be awarded.
The surety guarantees the obligee that the principal will fulfill his contractual duties. If the principal fails to do so, the surety will pay the obligee the performance cost’s excess amount.
The surety will assure the obligee that the principal’s construction workers, suppliers, and subcontractors will be paid. In most states, the payment bond is referred to as the Little Miller Act.
Other Types of Contract Bonds
A warranty that will cover any defective materials used in the project or substandard workmanship for a period of one year after the project’s completion.
A guarantee that the necessary supplies needed for the construction project will be delivered on time.
What is the bond amount?
Both the amount of the bond and the conditions will depend on the full amount of the contract and the type of bond.
The Bid Bond amount is usually 5% up to 10% of the full contract amount. Performance bond amount, on the other hand, starts at 2.5%, while a Payment Bond’s minimum amount is 3% of the contract amount.
If you want to get a tailored quote for your project today, you may obtain a FREE quote here!
How can I obtain a Contract Bond?
You must first determine the kind of bond that your client requires. Once you have established that, you must submit a bond application.
The next step would be the underwriting process. An underwriter will evaluate pertinent information such as your financial history, construction company history, and your credit score.
Once that’s been satisfied, we will execute the bond and send it to you immediately.
Ready to get started on this bond? Contact us now! We look forward to partnering with you!