As surety professionals, we find ourselves explaining to people what it is we do for a living. A surety bond? What is that? It’s a good conversation starter because most people have never heard of a surety bond, or know what a bond does or why it’s required. A surety bond is the general product, but there are hundreds of different types of surety bonds.
Here’s a recent article to illustrate what a surety bond protects, in this case a performance bond. Norfolk County in Onatrio, Canada put out a project to bid for a multi-million renovation of the Simcoe Recreation Centre. The awarded contractor, Parthian Mechanical, was required to furnish a performance bond to guaranty completion. The contractor ran into issues and wasn’t able to complete the work, prompting the County to make a claim against the contractor’s performance bond, written by Western Surety. The surety stepped in and hired a contractor to complete the work, at no increase in cost to the tax dollars used for the Centre’s renovation.
Without the performance bond in place, the county would have been without recourse and forced to pay another contractor to finish the job. This would most certainly result in a higher price and more tax dollars for the same project. Performance bonds are usually less than 2%, and less than 1% on jobs in excess of $1 million; a small price to pay for a guaranty a job is completed to specifications of the contract.