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What is a construction bond? - Contractor provides a bond to the Owner in order to give assurance that, provided the Contractor is the successful bidder

There are 3 common types of construction bonding, Bid, Performance, & Payment Bonds

Bid Bonds

  • Typically, 5% to 20% of the Contractor’s project Bid.
  • Payment Bonds are issued typically BEFORE a Contractor has been selected by the Owner and awarded the contract. 
  • If the Contractor is the successful bidder (i.e. awarded the project) and decides not enter into a contract, the Owner can make a claim on the bid bond for the difference between the Contractor's bid and the next lowest bid, or the amount of the bid bond, whichever is less.  
  • In general, Bid Bonds are typically provided by the General Contractor, or the entity that holds the primary contract with the Owner.

Performance Bonds

  • Typically, 1.5% of the Contractor’s project Bid.
  • Performance Bonds are issued typically AFTER a Contractor has been selected by the Owner and awarded the contract. 
  • The Performance Bond promises that the terms of a contract (scope, price & time) will be performed by the Contractor. 
  • In the event the Contractor defaults on the work, the Owner can sue against the Performance Bond to recover costs against the outstanding work.

Payment Bonds

  • Typically, 0.5% - 2% of the Contractor’s project Bid.
  • Payment Bonds are issued typically AFTER a Contractor has been selected by the Owner and awarded the contract. 
  • A payment bond guarantees the Owner that in the event of a breach, the Subcontractor and suppliers will be paid any outstanding money due.
  • An Owner benefits indirectly from a payment bond, in that the Subcontractors & suppliers are assured of payment and work will continue.
  • Payment Bonds cover the Subcontractor; Performance Bonds do not.

CH typically requires a Performance Bond from the Pool Contractor when Pool Contractor is a subcontractor.

When the Pool Contractor is prime contractor or holds their contract directly with Owner, CH to require a Bid Bond.

CH spec regarding bonding is to not only qualify that the swimming pool contractor has the technical ability but to confirm they have the financial ability

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