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Training Surety Professionals

Basics of Surety Bonds
How to Obtain Surety Bonds
Qualifying a Surety Company
Comparison to Other Risk Management Products
Claims Process
Protecting Taxpayer Dollars
Contractor Failure
Managing Risk


Basics of Surety Bonds

Surety bonds have been a valuable tool for centuries. While suretyship has a long history, it wasn’t until the 19th century that corporate surety bonds were used. Discover the basic principals of contract surety and learn how surety bonds can ensure the completion of a project by selecting a topic below.


10 Things You Should Know About Surety Bonding

Making the right choice to mitigate and manage risk on construction projects and selecting the most fiscally responsible option to ensure timely project completion are imperative to a successful project - and a sound business.


 

Importance of Surety Bonds in Construction

Learn about the importance of surety bonds in construction.  This brochure covers historical perspective, risky business, types of bonds, financial security and construction assurance, prequalification of the contractor, contractor failure, bond rates and benefits of bonds.


 

When You Build… Bond

Construction can be a risky business. As a building owner, risk manager, or construction lender, your goal is simple: successful completion of the project. Achieving that goal, of course, means that material suppliers, contractors, laborers, and others must honor their commitments and do the job they were contracted to do.


How to Obtain Surety Bonds

Federal, state, and local governments require surety bonds in order to manage risk on construction projects and protect taxpayer dollars. However, surety bonds are not limited to public construction. Many private project owners and lenders require bonding on their projects and prime contractors may require subcontractors to obtain bonds.

In today’s competitive construction environment, a contractor’s ability to obtain surety bonds has a significant effect on that contractor’s ability to acquire work.

Learn more about obtaining a surety bond by selecting a topic below.


 

How to Obtain Surety Bonds:  An Introduction to Contract Surety Bonding For Contractors

Federal, state, and local governments require surety bonds in order to manage risk on construction projects and protect taxpayer dollars. However, surety bonds are not limited to public construction. Many private project owners stipulate bonding requirements on their projects, and prime contractors may require subcontractors to obtain bonds.

In today’s competitive construction environment, a contractor’s ability to obtain surety bonds has a significant effect on that contractor’s ability to acquire work.


SBA's Surety Bond Guarantee Program

The U.S. Small Business Administration’s (SBA) Surety Bond Guarantee Program, with cooperation from the surety industry, assists small construction companies in obtaining required bonds on federal, state, local, and commercial construction projects and on service and supply contracts and subcontracts. 


Your First Bond

Helping Contractors Grow:  Surety Bonding for New & Emerging Contractors

Learn about fostering a relationship with a surety company, the prequalification process, programs for new & emerging contractors, bonding support programs, bond guarantee programs and mentor/training programs.


Qualifying a Surety Company

It is important to know whom you are dealing with when applying for surety bonds. Most large property and casualty insurance companies have surety departments. In addition, there are some insurance companies for which surety bonds make up all or most of their business.

Before accepting a surety bond, it is important to verify that it is from a licensed and reputable surety company.

Learn how easy it is to verify that the surety company is reputable and licensed to do business in your state by selecting the topic below.



Surety Companies:  What They Are & How to Find Out About Them

This updated brochure describes some resources that offer information on surety companies including surety bond producers, state insurance departments, U.S. Department of the Treasury and A.M. Best Company.


Comparison to Other Risk Management Products

When it comes to limiting exposure to the inherent risks of construction, there is no substitute for time-tested contract surety bonds. While proponents of bank letters of credit claim they provide adequate protection, they fall short of the protection and services of a surety bond.

Learn the differences between surety bonds and bank letters of credit by selecting a topic below.


Surety Bonds vs. Bank Letters of Credit

This brochure comparing surety bonds with letters of credit makes it crystal clear why surety is the preferred method of guaranteeing an obligation or project. No charge for Members or Non-Members for up to 25 copies of this brochure.


Our Letters Are Not Their Bonds(RMA Journal, February 2006)

From time to time, bankers are asked to provide letters of credit (LC) for their clients.  Because an LC essentially substitutes the bank's credit for that of the client, bankers typically issue them prudently.  There are many logical reasons for issuing LCs, but substituting for a contractor surety bond is not one ot them.


Surety Bonds vs. Subcontractor Default Insurance

A surety bond is a comprehensive risk transfer mechanism that provides the prequalification of subcontractors; shifts the entire risk of the principal’s default from the obligee to the surety; requires the surety to manage default situations; and provides 100% payment protection to certain subcontractors and suppliers. SDI is often described and marketed as an alternative to traditional performance and payment bonds, but it is merely a traditional insurance policy and provides no payment protection for subcontractors, suppliers, and laborers.


Claims Process

In the unfortunate event of contractor failure on a bonded project, it is important to understand the claims process, the participants, and the complexities of a surety bond claim.

Learn about surety bond claims by selecting the topic below.

 A Construction Project Owners’s Guide to Surety Bond Claims


Protecting Taxpayer Dollars

In 1894, Congress passed The Heard Act, which was supplanted by the Miller Act in 1935. Since then, the federal government has required that contractors obtain surety bonds for public works, and virtually all the states have followed with their own statutes, called “Little Miller Acts.”

Learn how surety bonds protect public construction projects by selecting a topic below.

The Surety Safeguard: How Bonding Protects Taxpayer Dollars

When a government entity awards a construction contract to a contractor, it knows that the contractor’s surety bond company stands behind the contractor’s promise to complete the job according to the owner’s specifications and terms of the contract. A surety’s prequalification of a contractor decreases the chance of contractor failure,
but contractor failure sometimes is inevitable. When such failure occurs, taxpayers are protected against virtually all losses caused by contractor failure.


Why Bid Performance & Payment Bonds Are Required for Public Construction Projects


Contractor Failure

Construction is a complicated business that faces ever-challenging conditions, and those who are not prepared or capable of meeting these demands may ultimately fail. Thousands of contractors, whether they have been in business for two years or 20, fail each year, leaving behind unfinished private and public construction projects with billions of dollars in losses to project owners.

Learn about the warning signs and events that can lead to contractor failure by selecting a topic below.


Why Do Contractors Fail?

Construction is a complicated business that faces ever-changing conditions, and those who are not prepared or capable of meeting these demands may ultimately fail. Every year thousands of contractors, whether in business for two or twenty years, face bankruptcy and business failure.
According to BizMiner, of the 986,057 general contractors and operative builders, heavy construction contractors, and special trade contractors operating in 2011, only 735,160 still were in business in 2013—a 26.24% failure rate. These businesses leave behind unfinished private and public construction projects—and still worse, millions of dollars in losses to project owners and taxpayers. Public and private construction project owners can mitigate the risk of contractor failure by requiring bid, performance, and payment bonds.


Managing Risk

For years, surety bonds have been mandated by law for federal public construction projects under the Miller Act of 1935. Many state and local governments also require surety bonds on their public construction projects with “Little Miller Acts.” Surety bonds also are used for many private projects as well. Moreover, an increasing number of construction lenders are now recognizing the wisdom of requiring contract surety bonds to protect loans secured by private sector projects.
Information about the benefits of surety bonding for private owners and bankers may be found here.


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