What do bid bonds and performance bonds cost?
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Transcript
| Contractor: | I have a basic understanding of what bid bonds and performance bonds do, but what will they cost me? |
| JW: | Bid bond costs are minimal. Small to mid-sized accounts can expect to pay about $100 per bid while large accounts get bid bonds as a free service. |
| Contractor: | So what will the performance bond cost me? |
| JW: | Nothing. |
| Contractor: | You have to be kidding. |
| JW: | No. As a contractor, you aren't supposed to be paying a dime for the bonding requirements. |
| Contractor: | So you're going to bond my company for free? |
| JW: | No, not quite. You need to keep in mind that surety bonds are a form of insurance for the government to protect the tax payers' money from you defaulting on public work. |
| Contractor: | So the government pays for the bonds? |
| JW: | You got it! However, it is on you to list it within your bid specs. If you do not list bonding costs in your bid then you will ultimately pay for the bond costs. |
| Contractor: | Aren't they going to reject my bid for passing the bond costs onto them? |
| JW: | Not at all. In fact, they fully expect to pay for the bonds. |
| Contractor: | That's great news! So how do I know how much to include in my bid for bond costs? |
| JW: | Your agent will let you know what rate you qualify for when you setup a bond line. The rate is a percentage of the bond amount you pay as your premium fee. They typically vary from 1-3% depending on your experience and financial qualifications. |
| Contractor: | Now I feel dumb...what is a bond line again? |
| JW: | Great question. Let's talk about how bond lines work next time! |