What are Performance Bonds?
Whether you are a prime contractor, subcontractor or project owner, you may need a Performance Bond when working on a public works project. Your Performance Bond is a binding obligation among you (the contractor), a public agency (obligee) and an insurance company (surety) that guarantees your performance during the project. By purchasing a construction Performance Bond, you essentially protect the government or contracting agency from any potential default and related damages.
What if I can’t finish the job?
Performance Bonds are required on public contracts in the amount of 100% of the contract price. Your Performance Bond guarantees you will fulfill all the terms of the construction contract. This includes the contract, job plans and specifications. If you cannot meet these obligations, the surety is required to complete the job per the contract using the balance of contract funds and paying for any shortfall that a completion contractor will charge.