What Are Public Works Bonds?
Public works bonds are a type of contract bonds. Public project owners often require construction specialists to post such bonds when being awarded a contract for executing public works.
Typically, public works bonds refer to payment bonds. Their purpose is to guarantee that the main contractor on a public project will make all due payments to subcontractors, suppliers, workers and any others partners for the services and materials they have provided.
In some cases, performance bonds may also be required in relation to public works projects. They guarantee that contractors will execute all conditions that they have committed to in the contract, thus ensuring duly and timely completion of projects.
Public works bonds function just like the rest of surety bonds. They are, in essence, a contractual agreement between three parties. Your contractorship is the principal that needs the bond. The public authority that requires the bonding is the obligee. The third entity is the surety, which provides the bonds and backs your business.
Public works bonds are required in most states. Below you can find more details about requirements in some of them.
For public projects above $100,000, contractors in Kansas should post a payment bond. The minimum bond amount should be the total contract sum.
Michigan contractors have to post performance and payment bonds for public projects above $50,000. The bond amounts should be more than 25% of the contract sum.
Contractors in the state who want to work on public projects above $100,000 have to get payment bonds. The bond amount of the Oregon BOLI bond is set at $30,000.
For municipality or joint board projects created under Transportation the Code that are above $50,000, as well as any other public projects above $25,000, contractors need to post payment bonds. Performance bonds are needed for projects above $100,000. The bond amount is equal to the contract amount.
State Division of Building and Construction projects above $200,000 require contractors to obtain public works bonds. For all other state departments, bonds are needed for projects above $100,000.
For projects below $35,000, a 50% retainage may be usedinstead of a bond. For projects between $35,000 and $100,000, individual sureties may be used instead. If a project is $100,000, however, a public works bond is obligatory. The bond amount is equal to the contract amount.
Questions about Public Works Bond
How much does getting bonded cost?
Your surety bond cost is formulated on the basis of the bond amount you need to provide and your financial situation. To get bonded, you do not need to cover the whole required amount. You only have to pay a bond premium. It represents a small fraction of the bond amount. Applicants with good finances often pay between 1% and 5% for the bond.
The surety you apply with will take a close look at your personal and business finances. The most important factors it will consider are your personal credit score, company documents, and any liquidity and assets you own. This is how it can assess the level of risk that bonding you presents. The surety can thus make a prediction how likely you are to stick to your contractual commitments, or to make any payments on bond claims if such arise.
In case your finances are problematic, you may still get bonded via Lance Surety Bonds’ Bad Credit Program. The bonding rates will be higher, but you will be able to obtain the bond you need.
How do I get bonded?
In case you want to access your exact bond price, you can submit your full application, together with your documents. We will examine your application and deliver your price in no time.
If you’d like to learn more about the bonding process, our How to Get Bonded page contains further details.
Need help with your application? Just call us at (877) 514-5146. Lance Surety Bonds’ specialists are here to help you.