01 Jul Bid, Performance and Payment Bonds: Quick Need To Know Facts
Bid Package Curveballs
When estimating or bidding on a new project opportunity for your company, you may come across certain bonds that will be needed in order for you to even submit your bid for your company’s work as well as ones that are needed after you are awarded! The Bridge Cable team recently got offered an opportunity to bid on a project that would require new wireless access points, telephone lines and a line for their newly install ClearTouch boards in multiple classrooms across a multi-building college campus. Due to the fact that this project is being government-funded, there were a few additional hoops that had to be jumped through for this bid package!
You may be asking yourself, what do you mean, “bonds”? There are three bonds that you may come across:
- Bid Bond
- Performance Bond
- Payment Bond
You would need to obtain a bid bond prior to even submitting your entire bid package. Our particular bid bond requirements were to either retrieve a bid bond covering 10% of our total bid price or a cashier’s check also covering the 10% of our total bid price. To sum it up, a bid bond will assure the project owner that you will abide by all of the terms laid out in the bid contract.
The first step you need to take is to go through a surety agency. However, you may be just as fortunate as us and were able to go through your insurance company that issues COI’s. Another important thing to note is that if the project you are bidding on has a pre-drawn-up bond agreement, you will need to provide this to the surety agent as well. Otherwise, they will be more than happy to draw one up to allow you to move forward.
After you receive your bid bond, provide it with your final bid package and now you wait. Waiting….we ALL love waiting. After time goes by you are now filled with excitement because you’ve been awarded the project – CONGRATULATIONS!
Payment and Performance Bonds
Next up, you will have to provide a payment bond and performance bond in a previously specified amount of time after the award happens. Using the same surety agency as before, provide them with the pre-drawn bond agreements or obtain one from them. Typically you will have to cover 100% of your total bid amount for the project.
The Payment bond helps to assure that everyone will be paid fully and that there will be no mechanic’s lien. This is assuming that no breaches of contract occurred of course. The Performance bond helps to assure that you will meet the terms of the contract and helps cover the project owner in case the bidder is indeed in breach.
It can be a lot to handle if you haven’t come across any bonds before in a bid but we encourage you to do a lot of research so you have a full understanding of everything.
Another thing you may come across with government-funded jobs is the prevailing wage. These are set rates that must be paid to each employee working on the project, no matter how much higher it may be from their typical rate. There is also a section called “Fringe Benefits”. This can be handled in two ways. An employer can either provide fringe benefits to the employee (which is a combination of health care, vacation, pension, and training) or the employer can pay the cash equivalent. All of this information can be found on your local state’s website. It is thoroughly broken down by job type and to some degree, it can be broken down to senior or junior technician depending on your trade! It is really important that you pay attention to the fringe benefits part because if this isn’t included in the employee’s pay, they have a right to claim for non-payment of the proper prevailing wage.
No matter your project, we hope that you had an easy experience with bonds as our Network Cabling team did! If you have any questions, please feel free to reach out to us on our contact form: https://www.bridgecable.com/contact/
Give us a call today at 877-832-1206 to book your Network Cabling Installation project today!