When negotiating or bidding a construction contract, a major concern is whether or not the contractor is competent and capable of doing the work. Does he have experience in the type and size work to be done? Is he financially strong enough to finance the work and to pay his sub-contractors and suppliers? Where does the owner stand if problems arise -- if the contractor is unable, for whatever reason, to complete the contract?
It is very difficult for an owner to properly check a contractor’s financial credentials. And even if he does, who is to say that the contractor will have anything left if the job “goes south”? An award for Breach of Contract isn’t much good if the contractor has no assets to satisfy a claim. So what’s the answer? What can the owner do to protect himself? The answer – A SURETY BOND! Or more precisely, Performance and Labor and Material Payment Bonds.