Category: Construction Bonding Specialists

MDOT Showcases Roadwork Funded by Whitmer Bonds

Specific sections of roadway are being showcased by the Michigan Department of Transportation by way of signs that say, “Bond Financing at Work,” which alludes to Governor Gretchen Whitmer’s 2020 road bonding plan. 

MDOT spokesman Jeff Cranson said about 15 green signs ($750 each) have been installed throughout the state with plans to install more. One sign, located in a construction area on Interstate 496 in Lansing, is meant to assure “that the work is being done,” according to Cranson. 

“Installing these signs is consistent with MDOT’s objective to be transparent and provide the public with as much information as possible about road projects,” Cranson said.

House Republicans who have opposed Whitmer’s bonding plan added a stipulation to the transportation budget requiring that the signs mention the monetary amount paid by the state in interest and borrowing costs to repay the bonds. 

Currently, the 2022 budget requires construction and borrowing costs to be listed on the signs. MDOT is not complying with the law, so the 2023 budget approved by the House includes provisions for non-compliance. 

Cranson says the addition of words or signs as outlined by the House budget would increase the cost of each sign. 

In 2020, Whitmer suffered from a failed bid to bump up the state’s gas tax by 45 cents a gallon to finance road renovations. In response, she launched her “Rebuilding Michigan Plan,” announcing it during her 2020 State of the State address. The next day, the Michigan State Transportation Commission authorized the department’s use of bonding.

Rough estimates by economists showed that the $3.5 billion program would total approximately $5.2 billion if the state remits annual debt bond service payments of $206.6 million for 25 years. About $529 million of the $1.6 billion issued thus far has already been spent or is spoken for, with an additional $1.9 billion in bonds to be sold in the future. 

At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 to learn more.

Written by the digital marketing team at Creative Programs & Systems: https://www.cpsmi.com/

What’s the Difference Between Contractor Bonds & Insurance?

Contract workers are required to attain a license or permit bond from a surety bonding company, such as ourselves. They are also required to obtain worker’s compensation and liability coverage for their crew. The difference between bonding and insurance can be a bit confusing and unclear. Read on to learn how to decipher between the two.

What is Workers Compensation and Liability Insurance?

Worker’s Compensation is a type of insurance policy that guarantees the injured employee to receive medical care, disability/rehabilitation, and have expenses related to the injury covered. Typically, while having worker’s compensation coverage, employees have their right to sue for negligence waived.

Some employees may opt-out of their employer’s worker’s compensation policy. Certain employees may have a pre-existing condition or injury not covered by worker’s compensation. In either of these cases, it’s important to maintain liability coverage, as the employee may file suit against the employer. Liability insurance protects employers from instances listed below.

Workers’ Compensation & Liability Insurance Covers:

  • workplace injuries
  • injuries occurring during work-related travel
  • injuries due to workplace violence
  • natural disasters
  • illnesses
  • fatalities

What is a Contractor License Bond?

Each state holds its own requirements for permitted construction work, but all require at least a permit bond and/or a license bond. Contractor license and permit bonds are a type of surety comparable to a line of credit and allow the contractor to perform work within that jurisdiction. The bond is an agreement between the contractor, the state licensing agency, and the surety company stating that the principal contractor will provide services in accordance with state and federal law (adhere to building codes, etc.)

If the contractor fails to fulfill the terms, a claim can be made against the bond, and the surety will investigate. If the surety concludes that the claim is legitimate, it will usually pay compensation to the claimant, up to the bond’s total value. The contractor remains liable for their obligations and must repay the surety, even though the surety company initially covered the claim. Therefore, these types of bonds are associated to a line of credit rather than insurance.

Summary of Contractor License Bonds, Workers Compensation, and Liability Insurance

  • A contractor license bond protects the contractor’s clients and the public. It’s a line of credit that, if used, requires the contractor to repay any compensation the surety had to extend out to the claimant(s).
  • Worker’s compensation is an insurance policy that covers employees in cases of work-related injuries.
  • Employer liability insurance protects/covers employers from lawsuits that may arise in cases of work-related injuries.

Understanding the requirements for permitted construction work can be complicated. At Construction Bonding, bonds are all we do. Call us today for professional, straightforward, and sound surety advice.

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At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 or visit us at www.bondingspecialist.com today.

Contract Bonds

The construction season is fast approaching, so those bidding on new jobs will need to make sure they have the appropriate contract bonds lined up to qualify for review. The process can be confusing, and unfortunately, some requests for proposal (RFP) contain vague language regarding the bond specifics. Those vying for government construction work and maintenance, often privatized jobs, will need a contract bond (or surety bond.)

Surety bonds are contracts between three parties: the principal, surety, and oblige. They provide a financial guarantee that one party will fulfill their legal, contractual obligations to another. A surety bond is more like a line of credit than insurance. Usually, construction contracts are completed to the satisfaction of all, where work expectations are met, and wages are paid out – the surety doesn’t need to get involved. If a disagreement occurs and the principal and the client (generally the oblige) can’t settle on a compromise, they can file a claim with the surety for financial compensation. The surety will investigate the claim, and if found legitimate, the surety will pay the claim in an amount up to the bond penalty.

A contract bond refers to several surety bond types. Below are the three most common contract bonds:

Bid Bonds: A bid bond is a prequalification indicating that the contractor is bondable for the performance and payment bond should they be read low or chosen by an Owner/GC/CM to enter into the contract and provide a Performance and Payment Bond.

Performance Bonds: Performance Bonds offer assurance that the bonded contractor will perform according to all contract documents.

Payment Bonds: Payment bonds assure that the bonded contractor pays for all materials and labor associated with the documents related to the contract.

Need help obtaining a contract bond? CBS will help you determine the RFP bond requirements in order to submit a bid and consequently win the contract. Contact us today for assistance.

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At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 or visit us at www.bondingspecialist.com today.

Written by the digital marketing staff at Creative Programs & Systems: www.cpsmi.com.

Surety Bond Use In Everyday Life

Surety bonds are a part of everyday life.  Many individuals don’t understand the concept of bonds and how they are used to protect parties entering into a contract with one another.  In basic terms a surety bonds are a binding legal agreement that offer financial guarantees to the parties involved in a multitude of contracts.  Surety bonds state that one party, known as the surety is obligated to a second party, the obligee , in case of a default by the third party, the principal.

Various categories of surety bonds:

Contract surety bonds offer both financial security and construction assurance on projects both building and construction.  Contract surety bonds assure the project owner that the contractor will meet the requirements set forth in the contract.  If the contractor fails the project owner the surety company will cover the contract requirements so that the project owner is not at risk of loss.  The surety offers a guarantee that the contractor will perform the job stated while meeting their financial obligations to subcontractors, material providers and employees.

Bid bonds ensure that a contractor submits a bid that is intended to meet the needs of the contract.  The price of the bid that is submitted covers the financial obligations of performing the work as stated in the contract while covering the expenses on their end.

Performance bonds ensure the project owner is covered from loss if the contractor fails to perform the contract as stated and agreed upon.

Payment bonds are in place to make sure that the contractor is liable for the expenses to subcontractors, laborers and materials related to the contract that was entered into.

Maintenance bonds protect project owners against defects in materials or workmanship for a specific, agreed upon period of time.

Subdivision bonds ensure cities, counties and states that the principal, contractor of a subdivision, will financially cover and construct improvements within the sub like streets, sidewalks, curbs, street gutters, and more to make sure the sub meets stated requirements.

License and permit bonds are obtained to allow certain businesses to do business. An example of these bonds include: construction bonds, motor vehicle bonds, employment agency bonds and more.

Fiduciary bonds secure that administrators, executors, guardians and such will perform duties in line with court stated orders.

Different bonds are used in special situations to guarantee that contracts or duties are performed as contracted.  Many people confuse insurance and bond however they are completely different.  Insurance is used to protect individuals or businesses from themselves or others where as bonds are used to make sure expectations are met by others.  Both protect against loss of finances.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.

The Many Contract Bond Types In Construction

Contract Bond Types

Contractor License Bond: Purchasing a contractor license bond is almost always a requirement of contractors before they are licensed to work on construction projects.  Depending on the laws within the state, county, city or even subdivision a contractor license bond could be required.  Without the necessary contractor license bond in place the contractors often cannot obtain the license that is needed to provide construction services.

If work is performed and a contractor does not have a contractor license bond or it has expired they will feel the impact in the form of penalties, fines, licenses being revoked and even legal action. Contractors are wise not to perform any construction work until they have their contract license bond in place.  The expense of not having this in place could sink a contractor before they even have the chance to get their business started.

Bid Bond: Construction projects do not all require bid bonds.  They are often asked for by project owners when a contractor is bidding out a project.  Financial proposals are submitted to project owners to provide a cost basis for the project.  Before a contract is entered the bid and contract terms need to be agreed upon.  Many project owners will not award the construction contract to contractors that fail to have a bid bond accompanying the contract.

A bid bond guarantees a contractor is entering into a contract for the amount of the original bid if the contract is awarded to them.  Surety bonds ensure contracts are filled to the terms of the contract that is entered into.  If a contract is awarded the surety bid bond guarantees the contractor will fulfill the contract at the amount originally billed.

Payment Bond: Any contractor seeking contracts that exceed one hundred thousand dollars are required under the Federal Miller Act to provide project owners with both a payment and performance bond. This includes any publicly funded projects when they include alterations or repairs to buildings that cost over one hundred thousand dollars as well.

A payment bond is a bond that ensures a contractor will cover the cost of materials and the payroll of sub-contractors.  The payment bond keeps the project owner from being liable from any costs if the contractor cannot pay.  The payment bond puts the ultimate liability on the surety company issuing the payment bond.

Performance Bond: Performance bonds are often paired with payment bonds as both protect project owners from loss sustained by contractors failing to meet their obligations.  The performance bond offers a certainty to project owners that the project will be completed at the level of performance that is stated within the contract the contractor and the project owner agree upon.

Contract bonds are a type of surety bond that contractors are issued by surety companies to guarantee project owners are covered from any inadequacy on the contractor’s part.  Each type of surety has criteria that must be met before a contractor’s eligibility can be determined for construction bonds.  Criteria such as the contractor’s skill level, resources, ability to perform and historical criteria have been met. Surety companies analyze the applicants, contractors, overall financial status, work history, standings in financing and credit report before the surety bonds can be issued.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.

Checklist To Evaluate Contractors

Looking for a professional contractor for commercial or residential construction projects can be all consuming.  There are steps that need to be followed to ensure that the contractor you are hiring can meet the performance expectations while staying on time and within budget.  In order to evaluate the contractor’s ability to accomplish this you must take time to look into their background.

Looking into a contractor’s background can consist of several things including reference checks, viewing portfolios and analyzing online reviews.

Reference Checks:  As you narrow down contractors to work with it is imperative to ask to speak to both recent commercial and residential clients.  These clients will revile what you can expect when working with the contractor.  This will give you an idea of where you should align your expectations should you choose to work with them.

Portfolio Viewing:  There are many ways in which a contractor can show off their portfolio.  A great way contractors can visually show who they are is through an online forum such as an up-to-date website rich in photos of projects.  Websites that offer images of projects from start to finish can often be the most helpful to individuals looking to hire a contractor.  If you want a closer look at projects completed by the contractor ask them to view a job they are currently working on or have recently finished.

Online Review Analysis: Getting to know a company is made simpler with internet review forums.  Read reviews from individuals reviewing contractors that have worked on projects similar to the one that you are looking to hire them from.  People are completely honest, maybe even too much so when it comes to online reviews.  It is a great place to get to know a contractor through their client’s eyes.

Although evaluating a remodeler’s background offers a great deal of insight to the hiring process it doesn’t offer a complete picture.  When selecting a contractor for construction endeavors it is critical to the success of the project to confirm that all individuals, including sub-contractors, are licensed, insured and bonded.

It is essential that any contractor that is hired for any residential or commercial project not only be licensed and insured but also bonded.  A variety of construction bonds are offered to ensure that all aspects of a project are covered.  Below is a list of bonds that secure the project owners interest in a project from a contractors default.

Contractor License Bond:  A contract license bond includes three different parties including the obligee, the principal and the surety.  This type of bond is secured as a promise that the surety (bonding company) makes to pay the obligee (project owner) if the principal (contractor) is unable to fulfill the contract as stated.

Bid Bond:  When a contractor is bidding on a project a bid bond is required especially on government projects.  A bid bond is used to inform the owner of the project that the contractor can secure a bond if they are the lowest bidder.  It states that the bid amount covers the financial liabilities of the project.  It ensures that contractors don’t low ball a bid in order to get the job only then to ask the project owner for additional funds as the project progresses.

Performance Bond:  A performance bond is used to guarantee that a project is completed.  It ensures that the job is performed as stated within the contract and that it is completed within the time frame that is expected.

Payment Bond: Usually a payment bond is issued in conjunction with a performance bond.  Contractors post payment bonds to ensure that the subcontractors and material suppliers that are working on the project will be paid.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.

The Difference Between Licensed, Bonded and Insured Contractors

What exactly is the difference between a contractor that is licensed, one that is bonded and/or one that is insured?  Competition in the construction industry is brutal.  Wading through contractors to determine the most qualified individual at the most reasonable price leaves many consumers baffled.

Where can consumers skimp and where shouldn’t they when it comes to hiring contractors?  Is hiring a contractor that is not licensed, bonded and/or insured worth the risk?  Probably not; in fact many consumers employing contractors without the proper credentials in place are placing their time, money and project completion in jeopardy.

Below we will detail bonded, licensed and insured contractors. This will allow consumers to have insight into why each is an important certification for hired contractors to have.

Licensed: Contractors are licensed as either a general contractor or specialty contractor.   Specialty contractors are those that offer a specific skill such as plumbing, electrical, drywall and the likes.  Specialty contractors are required to hold a special certification on top of their license.  The contractor’s license number is required to be displayed on any posted marketing materials.

Consumers are able to search for contractors by name or license number to ensure that the contractor’s license is up to date.  When an unlicensed contractor takes off after receiving a deposit there is little protection offered to the consumer this is one of the drawbacks of hiring any unlicensed contractors to do work for you.  An unlicensed contractor may cost less initially but there is no recourse if work is not done in specification to the contract.

Bonded: Bonds are purchased by contractors looking to prove their stability to consumers.  There are a variety of bonds that contractors can purchase to ensure they are trust worthy.  A bond is a contract between the contractor, the property owner and the bonding company.  It ensures that the contractor has financial backing incase the project is not completed as stated in the contract.  Common bonds that many contractors have are bid bonds, performance bonds and payment bonds.  All of which cover consumers from contractor negligence.

Insured: Contractors are required to have insurance to cover their business.  General liability insurance is purchased by contractors to insure that any damage to the property or people is covered financially if anything should happen while completing work at your location.

There are a few more things to consider when hiring a contractor.  Make sure that the contract is comprehensive and that no detail has been left out.  The contract should include the bid and scope of work expected to be performed.  It needs to offer an estimate on the price of permit fees as well as the payment terms, warranties and procedures for changes in the contract.  Often it pays to contact consumers that have recently used the contractor’s services to discuss the contractor’s ability to complete the job on time, within budget and so on.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.

The Process Of Obtaining Surety Bonds

Surety bonds are contracts between a business, bonding company and third party.  They are purchased by businesses to confirm the fiscal worthiness of a company as well as to offer affirmation on their reputation.   If a business should fail to comply with a contract the bond acts as financial coverage to the third party.

Obtaining any type of financial backing or support for a business venture comes with a process of verification.  The same is true of business of all sizes seeking surety bonds.  Companies specializing in surety bonds offer assistance to business owners seeking to obtain bonds through agents acting on their behalf.

Surety bond agents guide business owners through the bond process helping them to understand how the history of their business will affect the bonding process on a whole.  They are dedicated to working with business to examine contracts that require bonds and help determine a proper fit between their business, projects and the bond company.  A surety bond agent works to examine the business, assess client’s needs and prepares a submission to the surety bond company.  This is just the start for business owners looking for surety bonding.

The next step in surety bonding after an initial meeting between a bond company and a business owner is working with an underwriter to complete a history of your business and financial setup.  This is to access your overall risk.  The underwriter seeks to determine that you are not at any risk for being able to complete a project as specified within a given contract.  The information the underwriter will obtain consists of the business plan, future projections, positive cash flow, healthy credit, professional references and information on the chain of command within the business.

Prepare ahead of time by seeking out items such as annual finance statements for at least the last three years, cash flow statements, current accounts receivable and payable as well as an understanding of the accounting method used within the business.

Depending on the information provided on the company’s history and current financial situation the surety company give a rate in which the bond is to be issued at.  A solid history and financial status allows owners lower rates; a total of one to three percent on the total bond.  A business with risky historical data and uncertain financial situation can find themselves paying upwards of fifteen percent on a bond rate. The rate is dependent upon the risk the business, the more likely the business is to default the higher rate they must pay the surety company for the bond.  The bond is normally paid in one single payment.

Obtaining a bond can be an expensive endeavor.   To ensure that the business is qualifying for the best rate or to receive quotes from different companies before making a bond purchase go online and research the options available in the state in which business is conducted.  Surety bonds protect business owners and the people that are doing business with them from the risks involved throughout the process.  The most common bids obtained in the construction bonding process include: bid bonds, performance bonds and payment bonds.  Seek out a professional bonding company today to ensure the business and those it contracts with are covered in case of default.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.

The Important Of Surety Bonds

The bonding process may seem like a paperwork inconvenience.  The reality though is that without the financial support of bonds and the financial backing of surety bonding companies that often times the final result would not happen.  This is why surety bonding is so important throughout construction process.  Bonding ensures that all parties involved in a project are covered financially to complete the project at hand if there should be a party the defaults on the contract.

Performance bonds are in place to guarantee that work on a certain project will be done to the specifications set forth in the contract within a certain timeframe. This allows other aspects of the project to be scheduled without the fear of loss that comes from rescheduling and such.

Consider the following: a renovation on a school. The process begins with the bidding process.  School districts need to be certain that the contracted work can be completed within a certain time frame to ensure that when school starts in the fall the renovation is completed and children are not left without classrooms.  If the work is not completed as specified many people will suffer.  With bonds in place the obligee is protected from financial loss and is covered by the performance bond held by the contractor.

There are a variety of bonds used to ensure the flow of public construction projects.  In order to bid on any government or public project contractors must have established a bid bond with a surety company.  A surety company will look at the contractor’s history and determine a set fee on a bond.  A bid bond states that the bid that is submitted is fair and reasonable.  It states that a project can be completely fulfilled at the cost the contractor has bid.  This ensures that contractors don’t manipulate the bidding process by submitting a low bid in order to get the contract only later to raise the amount required to complete the project.

Another bond that is required on public projects is a performance bond.  A performance bond is a guarantee that states work will be performed as set forth in the contract.  The work is performed using specific materials, with a specific time frame and is done so as stated within the contract.  A performance bid protects the project owner from subpar workmanship and work not being performed within a certain time frame.  With all construction projects a clock is ticking.  One error on the part of a contractor or subcontractor can quickly spiral out of control. Bonds are used to ensure that the financial liability does not fall on the project owner.   All contractors have the same goal: to complete the job in a timely manner with the expected outcome.  Construction bonds help to protect all parties against financial catastrophe.

Surety bonds do not replace the need for insurance.  Liability insurance is different that a contractor’s bond.  Bid, performance and payment bonds are all used as another level of protection against things that occur that cannot always be controlled throughout the construction process.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.

 

The Difference Between Insured and Bonded Contractors

When hiring a contractor there is a big difference between contractors that are insured, a contractor that is bonded or one that is both insured and bonded.  Exactly what are those differences and how do they affect you as a homeowner?

When a contractor is bonded and insured it offers an incentive for homeowners to hire them over a contractor that is not.  Reputable home improvement specialists purchase bonds and insurance to protect consumers they work for while offering recourse in case something should go wrong.

A contractor’s bond offers protection to consumers against contractors failure to complete the job as the contract states, doesn’t pay for the proper permits or other financial obligations and such.  In order for a contractor to become bonded they must pay a premium to a surety bonding company.  Once the premium is paid by the contractor they are given a bond number and certification that confirms the surety company has agreed to provide protection to the consumer against several different issues that can arise from contractor error.

If you as a consumer feel that the work completed by the contractor is subpar or if materials and subcontractors aren’t paid they can contact the surety company direct to submit a claim.  The state and municipality where you reside will determine the bonding requirements contractors must meet to ensure they have the proper contractor bond.  Be sure to research these requirements before you hire a contractor to do work within your home or business.

A contractor that states they are licensed to perform work is different than those that are bonded.  Two types of insurance commonly associated with contractors in the construction industry: liability insurance and workers compensation.

Liability insurance protects against property damage that occurs because of work that is performed by the contractor.  It does not however cover issues related to poor quality workmanship.  Those issues are covered under a contractor’s bond.  This is why hiring a contractor that is both insured and bonded is important to protecting you as a consumer.

Workers compensation insurance is purchased by contractors to project against workers lost wages and medical services when they are hurt on the job.  The families of the worker are also compensation benefits through workers comp insurance in the event of a death that occurs while at work.  This is important insurance to look for as a homeowner when hiring a contractor to avoid being financially responsible for injuries that occur on your property while contracted work is being done.

To protect against any wrong doing on the part of the contractor be it intentional or unintentional it is important for homeowners to require contractors working for them to be both insured and bonded.

Construction Bonding Specialists, LLC are dedicated Surety Bond Professionals that are aligned with several Treasury Listed and AMBest Rated Surety markets which allows them to assist with virtually all Bid, Performance and Payment, Financial Guarantee and Supply bond needs.  Find out more information at http://www.bondingspecialist.com.