Who is a surety?

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About Who is a Surety

Who can be a surety– well, anybody can be a surety. In the older days, sureties were typically individuals, as a wealthy individual would provide surety on behalf of another. This would normally be a wealthier individual who would vouch for someone’s character, such as a cattleman that would vouch for the banker.
In modern times, a surety is normally a large insurance company, like AIG or Zurich. These companies have divisions of their larger insurance company that serves as a surety. These divisions focus solely on surety bonds and have a history of default that they use to determine the risk with regard to a specific bond.

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Surety Bond Obligee

What is a Surety Bond Obligee?  See more at https://swiftbonds.com/performance-bond/

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About A Surety Bond Obligee

The Obligee to any surety bond is the party that receives the benefit of the bond. In a contractual situation, this is the owner of a project. Thus, if the general contractor is unable to perform, then the Obligee can look to the surety to make it whole.

The Obligee is the party that requires the Obligor (the general contractor) to get the bond.  That way, if the Obligor is unable to perform under the terms of the agreement, then the Obligee can be assured that they can get another party to finish the project or get paid damages.  This reduces their risk considerably.

In any governmental contract, the federal government or municipality is the Obligee.

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Performance Bond being Required by Express Scripts for Contracting

As you can see from the article below, performance bonds are being used by more and more companies.  This has moved away from strictly the construction business into a more main stream approach as many companies are utilizing multiple different ways to reduce their risk.

Express scripts requiring performance bonds

FisherBroyles LLP

Express Scripts is now requiring some applicants who wish to contract with them to furnish a $500,000 performance bond for at least the first two years of the contract. This bond, per Express Scripts, “guarantees to the obligee (Express Scripts) that the principal will carry out the performance of their contract according to terms and conditions agreed to by the parties.” Express Scripts may also require that the bond extend beyond the initial two-year period.   These bonds are very expensive and difficult to obtain. The cost of such a surety bond depends on the pharmacy and its owners’ creditworthiness, but is still very high, and can easily exceed $15,000.

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Reasons why Industries Require Bids for Projects

Below is a good article from techaeris.com on why companies require a bid process for projects.  As you can see, there are a variety of protections in the bid process, including such things as a bid bond, pricing protection and contractual considerations.

Three reasons why industries require a bidding process for projects

http://techaeris.com/2017/06/18/reasons-industries-require-bidding/

One of the ways that owners save a great deal of money is by requiring companies to “bid” for their business. This ensures that the owner will get the best deal as well as the highest quality of work possible for the money. Not only does it save money, but it can also provide legal assurance that the project will be completed properly and in the time allotted in the agreement. This article will share several reasons as to why industries require a bidding process for projects.

  1. Best price.Many industries including the government, construction, and businesses all require a bidding process for projects. One of the main reasons that this is a required stipulation is that many bidders will apply for the same job which in turn gives the consumer the upper hand and likely a much better price. Many companies require at least three bids in order to move forward with a project. Typically the lowest bid will win but not always. Depending on the project, the budget, and the quality of work that is needed can all make a difference in who walks away with the opportunity to complete the project.
  2. Project protection.While getting the best price on a project is a top priority, it is also important that you hire someone who can complete the job on schedule and will also not cause additional expenditures along the way. It is important that you inspect all bids thoroughly and do your research to ensure that the company who will be performing the work is reliable and has reliable references to back up their work. If you are unsure of whether or not you are going to hire a company that can perform the work in the way in which it is agreed upon, you may want to consider purchasing a bid-bond. A bid bond can protect you from frivolous bidders who offer a low-ball price with no intention of following through to complete the project.
  3. Legally enforceable contract.A bidding process can provide security for both the general contractor and the company that is looking to hire out a project. Once the bidding process is complete and both parties have signed the contract, it is now legally enforceable and services must be rendered. If the services are not rendered, a refund or remittance of services must be distributed back to the company who did not receive all agreed upon services.

 

One of the ways that contractors lose out on potential business is because they do not read the proposal correctly and omit information that the company feels is of utmost importance. Attention to detail is important and can make or break one’s success. To help with the bidding process, many have begun to invest in software programs. Before submitting a bid, be sure to do an analysis of your company and determine if you have the staffing and monetary resources to complete the project. Once you have determined your ability to make good on the potential contract, you will then want to put together a bid that provides examples of work, budget and pricing information, as well as photos and any other information that will be helpful in the decision-making process.

 

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Bonds Fidelity

Bonds Fidelity Chart

Name Description Link
1. Bonds Fidelity A fidelity bond is one that does not provide assurance based on an underlying contract, but instead provides surety based upon the character of an individual. Extra Information
2. Fidelity Bonds These bonds are written for public servants, as well as certain employees that have jobs where they have the opportunity for bad acts, such as a bank teller. Extra Information

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Getting Bonded for Small Business

Getting Bonded for Small Business Chart

Name Description Link
1. Getting Bonded for Small Business Getting a bond for small busy is generally not difficult. Further, when a small business gets a bond, they can then go out and bid on more jobs. Extra Information
2. Benefits to the Business Further, there is a marketing benefit to being bonded as well as the small business can now assure its customers that it is a stable company that is able to complete jobs. Extra Information

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Contract Surety

Contract Surety Chart

Name Description Link
1. Contract Surety A surety can write a bond for many reasons, but one of the biggest reasons is to provide assurance based on an underlying contract. Extra Information
2. What happens to the Contract? They become the contract surety on behalf of the Obligor. Extra Information

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