What is a Washington Contract Bond?
Secure the completion of your dream project today through this bond!
There are various types of Contract Bonds. Each one serves a specific objective that is necessary for the proper outcome of a construction project.
A Contract Bond’s purpose is to ensure the following:
- Faithful completion of a contract by the Principal or Contractor
- Protect the Obligee/Construction Project Owner or financially compensate the Obligee if needed
- Pay the necessary wages, suppliers of construction materials, and other construction-related expenses
This type of bond is also known as a Construction Bond. 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 is secured for projects exceeding $100,000.
The key parties of a contract bond will be the following:
Principal – The contractor
Obligee – The owner of the construction project
Surety – the surety bond company who 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 the case of non-compliance or if the principal abandons the project, the surety assures the construction project owner that he 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, 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 shoddy workmanship for one year after the project’s completion.
A guarantee that the necessary supplies needed for the construction project will be delivered on time.
An assurance that the subcontractor will fulfill his contract obligations to either the prime contractor, the obligee, or both.
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 total 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.
The bond premium varies as well. For those who have excellent credit scores, the bond premium may be as little as 1% of the bond amount! If you want to know what you need to pay, get your FREE quote here today!
How can I obtain a Washington 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.
An expert underwriter will start with the prequalification process soon after. The underwriter will check the following:
- If you have performed your obligations on time in the past
- Your financial capability
- Your credit score
- Other valuable information
Ready to get started on this bond? Call us now! We look forward to partnering with you!