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A performance bond is a type of surety bond that guarantees a project will be completed as specified in the terms of a contract. The terms performance bond and contract bond are sometimes used interchangeably; technically, however, there is a difference. A performance bond refers to the completion of a specific project. A contract bond is a more general term that guarantees the fulfillment of a contract and can refer to more specific bonds, such as bid bonds, payment bonds and maintenance bonds, as well as performance bonds.
A bid bond is usually required to bid on a job that requires a performance bond. This type of bond guarantees that the contractor who is awarded the bid will perform the project without adding further costs or expenses.
Performance bonds are often required in the construction industry to guarantee that the value of the job will not be lost if the contractor should declare bankruptcy or go out of business. Since the passage of the Miller Act in 1932, performance bonds have been required for all construction contracts issued by the U.S. government. Likewise, states have subsequently enacted similar statutes, known as “Little Miller Acts,” that also require the posting of performance bonds for state construction projects. Performance bonds allow a government entity to use private contractors for public construction jobs. The potential for political influence is eliminated, and the taxpayers are protected if the contractor fails to comply with the provisions of the contract.
The concept of performance bonds is not new, as records exist of such bonding as early as 2750 B.C! Modern surety principles are based on ancient Roman laws of surety that were enacted around 150 A.D.
Are you a contractor whose job requires the posting of a performance bond? We, at Simon Insurance Agency, are experienced in helping our clients obtain any type of surety bond, including performance bonds, contract bonds, bid bonds and payment bonds. Whether your credit is superior or below average, we can assist you in securing your bond through our specialty market. Call us at 561.948.4141 to request a complimentary consultation and quote, and in no time, you’ll have that necessary bond to begin work on that all-important project!