This website uses cookies to store information on your computer. Some of these cookies are used for visitor analysis, others are essential to making our site function properly and improve the user experience. By using this site, you consent to the placement of these cookies. Click Accept to consent and dismiss this message or Deny to leave this website. Read our Privacy Statement for more.
Public Owners

Surety bonds have protected taxpayer dollars on federal projects since 1894. Most state and local jurisdictions require the protections of surety bonds as well.

The materials below are recommended materials for Public Owners:

Brochures  | PowerPoints  | Links


Brochures:

A Government Leader's Guide to Bonds

Using Surety and Fidelity Bonds to Protect Taxpayers, Empower Businesses and Enable Innovation

 Contract, commercial and fidelity bonds each serve a critical risk management and public policy function. This handbook provides an overview of each of these types of bonds, explains why bonding should be non-negotiable for agencies hiring contractors and for businesses operating within a state or local jurisdiction, and addresses how agencies can leverage this tool to protect taxpayer dollars and strengthen the public procurement process.


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.


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.


Surety Bonds at Work

Avoid performance and financial issues.  Learn how Surety Bonds enable projects to be completed.

 

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.

 

The Miller Act

In the United States, the law requiring contract surety bonds on federal construction projects is known as the Miller Act (40 U.S.C. §§ 3131-3134). The Miller Act is implemented through the Federal Acquisition Regulations (FAR) at 48 CFR Subpart 28.1. This law requires a contractor on a federal project to post two bonds: a performance bond and a labor and material payment bond. A corporate surety company issuing these bonds must be listed as a qualified surety on the Treasury List, which the U.S. Department of the Treasury issues each year.


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.”


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.

That’s because surety bond companies provide the resources necessary to complete the contracts and pay certain bills for laborers, material suppliers, and subcontractors. Obtained by contractors from surety bond companies, surety bonds transfer the risk of contractor failure to the surety.


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

Virtually all of the public construction work in America is accomplished by private sector firms. This work generally is awarded to the lowest responsive bidder through the open competitive sealed bid system. Surety bonds play a critical role in making the system work.

 


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.


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. Surety bonds provide prevention and protection.


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.


 

AGC Surety Claims Guide

The contract surety bond claims process, developed by the Associated General Contractors of America (AGC).


Risk Management Resources

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 other risk management resources such as bank letters of credit or subcontractor default insurance claim they provide adequate protection, they fall short of the protection and services of a surety bond.


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.


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.


Qualification Resources

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.



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.


Assistance for Emerging Contractors

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. The inclusion of small, minority, and emerging contractors is an important element of public construction.


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. 


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.


The Miller Act

In the United States, the law requiring contract surety bonds on federal construction projects is known as the Miller Act (40 U.S.C. §§ 3131-3134). The Miller Act is implemented through the Federal Acquisition Regulations (FAR) at 48 CFR Subpart 28.1. This law requires a contractor on a federal project to post two bonds: a performance bond and a labor and material payment bond. A corporate surety company issuing these bonds must be listed as a qualified surety on the Treasury List, which the U.S. Department of the Treasury issues each year.


 

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.


PowerPoints:


Surety Bonds 101: The Basics of Bonding



Why Do Contractors Fail?


 Managing the Risk of Contractor Default


Links: 

Small and Emerging Contractors

SFAA has a longstanding commitment to assist small and emerging contractors with bonding.  You can find out about our Model Contractor Development Program® on our website and our partnership with the U.S. Department of Transportation's Bonding Education Program.


 

Electronic Filing Resources

The objective of surety automation is to employ technology to streamline processes, reduce redundancies and increase productivity in the surety bond process, which spans the application for the bond, the execution and submission of the bond and the processing of premium. The objectives of surety automation are realized fully when methodologies involving transmission, security, verification and data integration encourage the broadest participation by surety companies, surety bond producers, contractors, project owners, risk managers and other parties in the bond process. Any methodology should seek to maximize interoperability among disparate systems. Broad participation in surety automation is the vision. Interoperability through open standards and systems is the way to that vision.


Value of Surety Bond Producers

Questions to Ask Your Surety Underwriter & Bond Producer

Attributes of a Professional Surety Bond Producer

Building a Surety Relationship Resources

Contract Surety Bonds: Protecting Your Investment

 

1140 19th Street, NW, Suite 500 • Washington, DC 20036-6617
Phone: 202-463-0600 • Fax: 202-463-0606