WHO PAYS THE BOND PREMIUM?
Of course, the owner eventually pays all costs anticipated in the contractor s bid, whether the project is fixed-price or is a cost-plus-fee arrangement. A private owner may want to provide separate reimbursement for the contractor s bond premium cost when the bond is delivered to the owner. This procedure ensures that bonds actually are furnished. SPECIFYING THE AMOUNT OF BONDS. Premiums rise along with the penal sum of the bond, and the owner ultimately pays these costs in the contract price. Nonetheless, the owner has an interest in setting the bond penal sum high enough to provide the desired protection to the project. A fairly good guideline for setting penal sums is the FAR requirement discussed hereinabove. The penal sum for the performance bond should be one hundred percent of the original contract price, and the penal sum should be increased for each change order. The payment bond should be fifty percent of the contract price up to some fairly large maximum penal sum.
