Explained about Surety Bonds

Also seasoned contractors are often misled into believing that bond costs are set at the time of issuance. In reality, a bond premium or fee is often adjusted in accordance with the contract’s final value. As a result of job change orders during the construction phase, the final value is usually, but not always, greater than the initial contract sum. Contractors must be aware of the possibility of a negative surprise in the form of an increase in the cost of their bonds. This realisation should occur during the bid planning phase, and contractors should examine the possibility of resolving any incremental rise in bond expense that will result from increased contract values due to project owner change orders as early as possible during the contract negotiation process.Do you want to learn more? Visit Surety Bonds

The main aim of a Surety is to screen out contractors who may have good intentions but are actually unqualified in all areas of their business to take on such projects. Surety underwriters are constantly on the lookout for red flags, both before and after the bond is issued.

According to a number of recent reports, the construction industry in the United States is a $445 billion industry with over a million contractors, 70 national contractor organisations and associations, and over 7 million employees. About 60,000 contractors in the building industry refused to honour their deals over the last ten years, cancelling public and private sector construction contracts worth more than 18 billion dollars, according to extensive business inquiries recently undertaken in the United States. When it comes to closing big transactions, a growing number of businesses are considering using surety bonds to avoid major financial losses and a cascade of negative outcomes. Surety bonds play an important role in the building industry and elsewhere, allowing project owners to mitigate significant financial risks.