Construction surety bonds are insurance that a contractor will compete the contract according to its terms. There are several types of surety construction bonds that are available, each serving the purpose of protecting the owner of the construction project from financial liability when using a contractor to complete the work. Bid Bond: A bid bond assures that the bid has been submitted in good faith. It guarantees that the principal and the owner will hone the bid. If the contract is awarded, a bid bond guarantees that all contacts will be signed and every effort will be put forth to complete it as detailed. If not, the owner may sue the principal and the surety to enforce the bond (which is why it is also called a surety bond ). Payment Bond: Contractors utilize a number of services to complete a contracted job. They must use and pay laborers, subcontractors as well as material suppliers in order to coordinate the completion of the construction project. A payment bond is issued in order to guarantee that the contractor will be financially responsible for paying for the services it uses. If the principal fails to pay the subcontractors or suppliers, they may collect their fees from the surety under the payment bond, up to the penal sum of the bond. Performance Bond: A performance bond is used to guarantee that the contract will be completed in the time frame, and at the price, specified in the signed agreement. If the contractor fails to perform the contract in accordance with its terms and conditions, the performance bond will protect the owner from suffering a financial loss. In the event of a contractor failing to complete the contract, the performance bond will give the surety three choices. They can either select a new contractor to contract directly with the owner. Or, the surety can take up the contract themselves and hire another contractor to complete it. Finally, they could choose to allow the owner to complete the costs themselves while the surety pays the cost. You may be wondering which of these surety bonds is best for your needs. This will depend on the nature of the job. Most large construction project owners will require their contractors to have performance bonds and payment bonds. Some may require bid bonds as well. Bid bonds, however, will only be issued to those contractors that quality for performance and payment bonds. Since each job, and owner, is different, this will be something you will need to discuss before you bid for the job. Construction projects require quite a bit of investment, of both time and money, and owners want to be sure that neither is wasted on a contractor that cannot fulfill his obligations. Surety bonds allow for construction projects to move ahead, with all parties confident in each other’s ability to succeed. As a contractor, you should develop a good, solid relationship with a surety, When you do, you will be able to get construction surety bonds quickly and efficiently, allowing you to land bids with confidence in order to have bonds issued quickly and efficiently, so that you can.