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Contractor Kicked off Project for not Providing Performance and Payment Bonds

On June 17, 2014 the New Haven Register published an article stating a Pennsylvania company was dropped from a pool covering project for failing to obtain a performance bond.  Click here for the article.  The company’s name was Signature Structures, and was contracted a tension roof to cover an Olympic sized swimming pool for $3.2 million.  The Town of Cheshire paid the contractor $80,000 for design work prior to terminating the contractor for not producing the bonding required by state and federal law.

While it’s great that the town realized the bond was missing, it should have not paid the contractor a dime without first producing the bond.  Especially since it appeared to have been a design-build contract.  To put in perspective the relative inexpensive costs of performance and payment bonds relative to the risk associated with construction, most contractors who are able to obtain a $3.2 million bond would pay less than 1% for the bond – or less than $32,000.  By not mandating the bond be in place prior to making a payment to the contractor, the town must now fight this out in court, with $80,000 plus attorney fees, all without any construction being performed.

In addition to the performance bond guarantying, to the taxpayer dollars and Town of Cheshire, a completed swimming pool roofing structure, the payment bond guaranties that the contractor’s subcontractors and suppliers are paid. It’s these parties that are often affected by not having the proper bonding in place.

At Surety1, we can help answer any questions about the bonding process, and pre-qualify contractors now so they are not faced with a dilemma such as this example.  Go to surety1.com/performancebonds to get started.

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