Page 331 - TCDB combined Book

310 The Complete DESIGN BUILDER

Bonding:

Although bonding will not be required on all of your projects there will be Tendered and
Public Funded projects that will require your bonding capability. Establishing a bonding facility
can be a formidable task and suggest you fully understand the extent of your obligations before
signing any Bonding Issuers Agreement. We recommend a full review by a lawyer or a legal
associate. Arranging bonding for start-up operations or companies with little or no track record
will be extremely difficult.

It is important to understand that bonding is not insurance and should the Bonding
Company be called upon to fulfill an obligation on your behalf they will usually have full recourse
to recover any loss from your company and possibly include your personal assets. Should you
choose to pursue a bonding facility at some point in the future, we recommend that you obtain a
Bonding Companies Application Form while maintaining your financial records and other project
information to suit their particular criteria.

There are three basic types of Bonds that will be required and they include the following.

Bid Bond

Performance Bond

Labor and Material Payment Bond

Bid Bond:

The Bid Bond is usually submitted with your Proposal or Tender. The purpose of the Bid
Bond is to ensure your acceptance of a signed contract with the possible forfeiture of the Bid
Bond amount should you withdraw your Bid.

In the case of an accepted Bid that is withdrawn the owner can accept a higher Bid using
your full Bid Bond amount to make up any Bid amount difference. The Bid Bond will also
acknowledge your acceptance of any other bonding requirements for this contract. Some Projects
will require submission of a Letter of Surety acknowledging the Bonding Issuers intention of
providing the specified Contract Bonding. Remember that Bid Bond forfeiture will result in the
Bonding Company acting on your Signed Agreement allowing them full recourse and
reimbursement for any incurred loss. Unless the potential loss in accepting a contract is
substantially greater than the forfeited Bid Bond amount we suggest serious consideration be
given before withdrawing a Tender or Proposal Submission. Clarify that any issued Letter of
Surety does not effect your liability or increase the amount of the Bid Bond.