Protect Yourself And Your Customers: Getting The Right Bonds Before Construction

A California Contractor Bond is a series of bonds that protect contractors and consumers during construction projects.

When a contractor is about to begin a new project there are a number of safeguards that have to be in place to protect the contractor and the consumer. In the state of California contractors are required to use a series of bonds to ensure that they are being upfront with their client and that the contractor will be paid for the work that is being done. Even before placing the first bid on a project, contractors need to look at the necessary bonds and file the paperwork they need with the state.

Bid Bond

The first bond that California requires for most jobs is a bid bond. This bond is a statement from a surety company, such as an insurance company or other bond issuer, that the contractor will be able to do the work that the contractor has bid on, at the price the contractor has bid. With this bond, consumers know that they will not hire a contractor at a reasonable price only to be blindsided when the contractor changes the initial bid at the last minute or charges the consumer more than the bid contract stated. A bid bond is just the first step in the bond process, and it shows the client that the contractor is eligible for the second bond in the process: the Performance Bond.

Performance Bond

A client never wants to hire a contractor only to have the contractor quit midway through the project, or find that the contractor is unable to complete the work that they have promised. A Performance Bond is a guarantee that the contractor will not only finish the work, but the work will be completed to the consumer’s blueprints or specifications, as agreed upon before the project begins. If there are changes to the design of the project after work begins, the contractor and the consumer will need to negotiate a different agreement.  Contractors that do not finish a project will face steep financial penalties. The bond issuer is responsible for covering any losses that the consumer might face if the job is not finished, but the contractor is financially liable to the bond firm to cover whatever money the bond company had to pay out on behalf of the contractor.

Payment Bond

The final bond that contractors will need before a project begins is a payment bond. These bonds are guarantees that the workers and suppliers that the contractor uses will be paid during the duration of the project. Too often a contractor runs out of money in the middle of a project and cannot make their labor and material payments, so the construction project stops. A payment bond ensures that this does not happen by giving financial backing to the contractor in the case of labor and material shortages. The bond must cover the entire cost of the project in order to be considered effective.

Contractors need a series of bonds to protect themselves and their customers during a construction project. With the right bonds in place during the bidding and construction process, contractors can make sure that they give their clients the very best construction and service the contractor can provide.

Neil is a senior editor at one of the best law firm and he loves to share his knowledge on California Contractor Bond.