Complex construction projects can cost millions of dollars, so there is a lot on the line for both general contractors and clients. When outsourcing different components of a project to subcontractors, general contractors can open themselves up to a significant amount of risk. If a subcontractor does not perform or fulfill their contractual obligations, then a general contractor can be liable or be required to cover the costs.
This is where construction bonding can help protect general contractors and their clients. Bonding is an essential business arrangement that protects parties against non-performance or major errors during a commercial construction project. A subcontractor can obtain a construction bond that protects a general contractor, while a general contractor may obtain a construction bond that protects the client. In many cases, construction bonding is required when it comes to public projects under state or local laws. Below, we’ll tell you all about construction bonding, and how Unique Building Group (UBG) makes it easier for general contractors to do business with us.
What Is Construction Bonding?
A construction bond is purchased by a party in order to protect a client or project owner against financial loss in the event the party does not complete a job, provides poor-quality work, or opens up the project owner to some form of financial loss. If a problem does occur, the client or project owner can file a claim with the surety company that backed the bond in order to recover losses up to a specified amount.
Construction bonding involves three parties: the principal (usually the subcontractor or general contractor), the obligee (usually the general contractor or project owner), and the surety company that issues the bond. When hiring a bondable subcontractor, general contractors are able to protect themselves if the subcontractor violates a term of the contract or causes significant property damage.
Types Of Construction Bonding
There are many different types of construction bonds that can be leveraged during a commercial construction project, but here are some of the most common ones:
- Performance Bonds
These bonds offer financial protection in the event a subcontractor does not perform the work required under the contract. A claim may be filed if the subcontractor refuses to complete some or all of the project, or if the work is completed as defined by the contractual requirements.
- Payment Bonds
Payment bonds protect a specific party from damages in the event the policyholder does not pay companies for their work on the job. Payment bonds are usually less common for subcontractors. More often, general contractors take out payment bonds to protect clients in the event they can’t pay subcontractors or material suppliers.
- Bid Bonds
Subcontractors can obtain bid bonds to help ensure general contractors they’re capable of completing the work under the terms of their submitted bid. When a subcontractor obtains a bid bond. it provides both financial and legal recourse to the general contractor.
- Maintenance / Warranty Bonds
Subcontractors can take out warranty bonds to protect general contractors and their clients in the event certain elements of the constructed infrastructure are defective. Warranty bonds often cover sewer lines, electrical work, and building materials. These bonds often require subcontractors to repair or correct faulty work.
- Supply Bonds
Supply bonds protect a general contractor in the event the necessary materials or building supplies aren’t provided. These are common on large-scale, complex construction projects.
How Being A Bonded Subcontractor Makes Working With UBG Easier
Bonds are an important part of any construction project. Things can and do go wrong in construction all the time, even when you’re working with the most skilled and experienced subcontractor. Bonds help to mitigate risk and put all parties at ease. Because UBG is a bonded subcontractor, we help GCs manage risk by providing our partners with financial recourse and protection in the event something goes wrong. And since we specialize in complex projects that many other firms can’t do, bonds are even more important for our partners.
Being bondable also proves our qualifications. Becoming a bondable subcontractor isn’t easy. During the process, the surety company will conduct a significant amount of background research. They review our experience, safety record, financial situation, and ability to perform. If a surety company has deemed a subcontractor as bondable, consider it a stamp of approval.
If you need a bonded subcontractor with an excellent safety record and a strong reputation, contact UBG today. We’re one of the industry’s leading complex framing subcontractors, and we’d be happy to bid on your job today.