Performance Bond Misinformation

The town of Holiday Island Arkansas had a small roof project out to bid. According to Carrollconews.com, Holiday Island District Manager, Gerald Hartley stated, “no qualified bids were returned”. The reason given was because of the performance bond requirements the city has on all jobs over $20,000. He goes on to state that financial reporting and the “cost of $2,500 to $3500 was just too much for small contractors to qualify for”.  I cannot help but think he got this information from small contractors that just were not qualified to do a $20,000 roof job without putting the tax payers at risk.

The job in question was just over $20k in size. The cost of a bond of that size would be well less than $1,000.00 (probably in the $600.00 range). As far as the financial reporting goes, for a job of that size, all it would take would be an owner of the construction company to have good credit and complete an application of a couple of pages to get the surety bond. There are several surety companies that now offer “short form” performance bond programs specifically to service small and emerging contractors.

The city is considering waiving or changing the bonding requirement. That is short sighted. If all it takes is a contractor with good credit to get the bond, why would the city want to risk the tax payer’s money? Without the bond, the city would potentially have to pay for materials twice and have no guarantee on the workmanship. The surety bond is a bargain for the city and the city’s tax payers.