Anybody know anything about performance bonds? Considering going after a bid for the local sewer authority, but they require a bond. I'm trying to work with another contractor who is a little more established than me (and who has dealt with bonds in the past) and have him be the prime, but I don't think he's all that interested. If nothing else, I figure it's good experience to get exposed to the process. Any insight wold be appreciated. Joe
All i know is to make sure money goes in escrow account. Beyond that i am of no help.
performance bonds insure the owner of the project that you will complete it...typically most govt. jurisdictions also require a payment bond...making sure that you pay all your suppliers...performance bonds are typically rated like a credit rating....the stronger your financials...the easier it will be for you to get one, and your rate for that bond will be at a cheaper rate than if you have some scars on your credit history. the most important thing in getting a bond...is to work with your accountant to process the statements the bonding companies will require. initially a little time consuming, but once your acct. gets on track on what they require...no big deal. most bonding companies also look at your track history....once you get several jobs under your belt with them, prove that you've completed it on time, paid your suppliers, made a few bucks...they'll typically increase your bonding line and reduce the rate they charge...again, the biggest thing is to find out what financials they require...have your acct prepare them...GOOD LUCK!!!
one more thing...you said the other contractor wasn't interested in bonding you. in reality, what he would be doing for you is like cosigning a loan at a bank.....should you default on the job, being it's his name on the performance bond, they will turn to him for the costs to finish the job, pay the suppliers, correct any faults in workmanship, etc..... having him bond for you does nothing for you. let's say that the bond costs him 2% of your bid. for him to make it worth his time, effort, risk....he no doubt will add another 5-10% to the bid for the hassle. many jobs are won/lost at margins much less than that. you'd be MUCH better off establishing your own bonding line. like i said earlier, initially a little time consuming, but well worth it