Government Purchasing Officers Get Pointers on Value of Expanding Surety Bonding

January 31st, 2018

Surety Bonds Seen as Key to Protect Public Interest In Public Sector Construction and Service Contracts

Executives of Unique Surety and Insurance Services, LLC recently presented an educational session on using surety bonding to provide contractual risk management for construction and maintenance projects to the Central Florida Chapter of the National Institute of Government Purchasing (NIGP).

Tom Wurth and Frank Germonto of Unique Surety explained that requiring project participants to be bonded provides a number of advantages for public entities, including:

  • Prequalification of contractors. Bond applicants are subject to rigorous examination by surety underwriters, who typically decline contractors with poor financials or performance track records.
  • Assurance of contract completion. Sureties can intervene to help prevent a contractor default. Should a default occur, they can identify alternative contractors and may pay any difference in fees.
  • Labor/supplier payments. Sureties can guarantee the payment of laborers and suppliers if the contractor fails to pay for work performed or supplies.

The presenters also reviewed the federal Miller Act, which requires bonding for all federal government contracts exceeding $150,000, as well as similar requirements by state and local governments. They noted that public entities may choose to establish their own bonding requirements for contracts ranging from $30,000 to $150,000.

According to Unique Surety, four types of surety bonds are especially useful in government projects, including:

  1. Bid bonds, which screen out unqualified bidders and provide government entities using the contract bid and award process with a means to recover the cost of repeating the bidding process if the awarded bidder is unable or unwilling to enter into the contract and supply required performance and payment bonds.
  2. Performance bonds, which provide government entities using the contract bid and award process with a guarantee that should the contractor default, the surety will complete the contractor’s obligations under the bond. Typically, this involves fulfilling the contract by finding a replacement contractor and/or paying any financial penalties as stipulated in the contract.
  3. Payment and labor and materials bonds, which ensure certain subcontractors and material suppliers will be paid if the contractor fails to meet its payment obligations.
  4. Maintenance and warranty bonds, which guarantee that contractors will remedy any defects in workmanship or materials within a specified time period (usually one to two years) following completion.

“Surety Bonds provide enormous benefit to public owners charged with guarding public funds,” Wurth said. “In short, the surety and the public owner share a mutual goal: The successful completion of the project.”

The presentation, attended by 70 government purchasing officers, is part of Unique Surety’s ongoing work to educate financial and risk management executives in the public and private sector on the effective use of surety bonding to protect the interests of their organizations.

For expert and timely assistance with all aspects of construction- and maintenance-related bonding, contact Unique Surety at 1-561-429-3600 x 1001 or