For the agent and client, there is plenty of paper to handle on contract surety bonds. So just when you get through the questionnaire, business plan, resumes, references, WIPs, and financials there is STILL ONE MORE DOCUMENT THAT WE NEED!
Yes, it is true. Bond Request Forms are the gift that keeps giving because you get the opportunity to do one as each bond comes up. So, considering these forms are not going away, let’s get comfortable with them.
The Bond Request Form is a summary of key factors concerning the specific contract and bond in question. The form is used for both Bids and “Final” bonds (Performance & Payment). It covers basics such as the name of the contractor and obligee, description of the work and the specific bonding requirements.
The form is used for underwriting and administrative purposes. The underwriters review the details and may literally sign their approval on the form. The admin staff will type the bond based on the Request Form – so completeness and accuracy are crucial.
Let’s break it down and go over some key areas:
- The Principal is the contractor and the Obligee is the party paying for the work. Sometimes the word “Owner” is used interchangeably with Obligee. If you see Owner on the Bond Request, it is not asking for the name of the owner of the construction company; it means “Obligee.”
- The description of the work should read as stated on the related contract or bid invitation. If you are bonding a roofing contract, the description should not be “4th Avenue Elementary School.” It should say “…roofing…” On a final bond such errors are embarrassing. In a bid situation an incorrect job description could result in a bid protest (by the second bidder) and loss of an award.
- For Bid Bonds, show the estimated contract price (ECP), not the actual bid amount. This is to protect the bid confidentiality. Sometimes we bond more than one contractor on the same bid.
- Always submit a sufficiently high ECP to allow room for a last minute bid increase. (See Secret # 8.)
- Show the actual bid date, not the day before for “safety.”
- Bid results are important to show if they are available. Typically they are on public work.
- When indicating the final bond requirements, do not indicate “100% P&P” unless the spec actually calls for this. Some projects require a Performance Bond but no Payment. It would be important to not automatically issue a Payment Bond, since they are the most frequent source of surety claims. The Principal and Surety should never voluntarily assume this risk.
- Work On Hand: The current WOH figure is comprised of the “estimated cost to complete” of all open work – excluding the project in question.
- Be sure to fully complete the form, include required attachments and sign if necessary.
- Points of interest:
- Sureties are usually reluctant to provide a 125% P&P Bond.
- If the bond is for less than 100% of the contract amount, there may be no reduction in the bond cost.
Bond Request Forms: We love them and you should too! Every one is a chance to serve your client and make money.
Call us with you next Contract, Site or Subdivision Bond.
FIA Surety / First Indemnity of America Insurance Company
2740 Rt. 10 West, Suite 205
Morris Plains, NJ 07950
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