What Is Bonding in Construction?
Construction bonding is a risk management tool used to protect project owners and developers. A bond constitutes a legal guarantee that the project will be completed as expected. In instances where a bonded contractor fails to perform, the bonding company will provide some form of restitution to the owner. While bonds are not required on all projects, there are strict bonding standards on government work. Many private owners and developers might also require bonds to protect the interests on various projects. Types Three types of bonds are used in construction. Bid bonds are issued during the bidding process. They constitute a guarantee that a company will sign a contract for their specified bid price if they are the low bidder. Performance bonds ensure that the contractor will complete the job according to the contract. If they fail to perform, the performance bond guarantees that no money will be lost in bringing in another contractor to complete the work. Payment bonds guarantee tha
