Bonds Explained

Almost all of the County’s construction work is done by private-sector contractors who must provide two bonds to guarantee their work; a performance bond and a labor and materials bond.

These bonds are usually issued by an insurance company which is called, “the surety.” 

The Performance Bond guarantees that the contractor will perform the contract in accordance with the stated terms and conditions, at the agreed upon price, and within the time allowed. The limit of the performance bond must be 100% of the contract amount.

The Labor and Materials Payment Bond protects laborers, material suppliers and subcontractors against nonpayment.

Because a mechanic’s lien cannot be placed against public property, a payment bond may be the only protection these claimants have if they are not paid by the contractor.

The limit of the labor and materials bond must be 100% of the contract amount.

All bonds must be reviewed to verify that they include following four critical elements:

1. A limit of 100% of the contract amount;
2. A statement that the surety has given power of attorney to the “Attorney-in-Fact”;
3. The bond has been signed by the above referenced Attorney-in-Fact; and
4. The bond has been signed by the principal (the named contractor).