Bid Bond Results

One of the major kinds of activities that we are engaged in is the constant upgradation of the software products we design and offer as part of our global services, such as construction bidding software.

By making good use of this well-designed construction bidding software, you are sure to enjoy long-lasting benefits whether you are a small-scale professional or large-operations based entrepreneur engaged in the construction industry. For example, the home builders, lenders, sub contractors, architects, and so on can gain many significant benefits seamlessly.

For good reasons, we are your number one choice for your helping you gain utmost satisfactory benefits from every activity that you undertake in the course of your daily activities in your construction business.

You can confidently use our construction bidding software to simplify the processes of generation of bids and also to record and track responses received against your bids.

For this purpose, our product is aptly named as BRIX and is quite well suited to any kind of needs you have with respect to the process of electronic bidding.

This software is sure to impress you by its salient features such as high level of customizing possibilities, affordability and flexibility in terms of accommodating future changes in the processes. There are distinct modules dealing with each major business process that you perform in your daily routine being an active participant in the construction industry.

Another major benefit associated with this software is that it performs the role of a bidding machine to help you at every stage, right from the generation of bids to recording and tracking them perfectly.

When it comes to gaining full value for the time, money and energy you spend on bid management, it is best advised for you to adopt the technique of electronic bidding to avail the multifarious benefits associated with it, such as:
Minimized chances of errors that would have been greater in case of manual submissions
Along with this, the time required for submission and review of bids is minimized quite significantly
There are good chances to get higher responses for your bids
Reports about bids, their progress and the responses are easily prepared using our software
Once you are able to sort out and attend to the responses in the least turnaround time, there is every chance that you will end up winning the bids in a hassle-free, thumping manner.

So, right from the project bidding stage till you win the deal, every step is automated for easy monitoring and management- our totally customer-focused approach is explicitly seen all over our services, at every stage!

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Bid Bond Form

Normally the Federal Reserve adjusts short-term interest rates to moderate the economic cycle. Even if short-term interest rates are very low, as they are at present, long-term interest rates are typically significantly higher. Recently the Fed implemented a new policy to reduce long-term interest rates to almost unprecedented levels. This policy proved to be very effective: the yield of long-dated US government bonds, i.e. the long-term interest rate, was at a 50-year low in late 2008 and is still very close to those levels.

This policy is partly an attempt to restart the housing bubble by lowering the rates for conventional 30-year mortgages, which are tied to the overall level of long-term interest rates. A recovery in housing, the Fed reasons, would lead to a recovery of consumer spending, which in turn would ‘fix’ the economy.

As we discussed in a recent article (“Fed Policy and Credit Bubbles” by D. Bourn and M. Gremm), encouraging consumer spending is a very short-sighted way of fixing the economy that will have highly undesirable consequences down the road. However, in addition to the problems discussed in that article, abnormally low long-term interest rates pose a much more immediate danger to bond investors: By forcing long-term interest rates down, the Fed has lifted bond prices, which are inversely related to long-term interest rates, into bubble territory.

This is not a problem if long-term interest rates stay at current levels, but if the government stimuli succeed and the economy recovers, long-term interest rates will have to increase to keep inflation in check. This will cause the bond bubble to pop and investors who bought at current prices will face dramatic declines of the value of their investments.

Investors who hold their bonds to maturity are likely to lose money on their investment due to inflation. Each bond has a yield to maturity, which is the return an investor who keeps the bond until it matures will realize. At current prices, 30-year government bonds yield about 3% per year. This guaranteed rate of return is normally the main appeal of bonds. However, inflation rates have historically averaged around 4%. Assuming that this continues to hold true for the next 30 years, investors who buy these bonds now and hold them to maturity will realize a loss of about 1% per year after adjusting for inflation.

Investors who do not intend to hold their bonds to maturity are exposed to a much more immediate risk. If the various stimulus packages succeed and the economy recovers, long-term interest rates will have to increase to keep inflation in check. This will cause a steep decline in the market price of bonds. An investor who sells after the decline has taken place may face substantial losses.

Two of the largest historical declines in the market value of bonds occurred in 1994 and 1999. The value of the Ibbotson long-term government bond index declined 14% in 1994 as long-term interest rates increased from 6.5% to 8%. In 1999 interest rates increased from 5.4% to 6.8% resulting in another 14% decline. The present situation will most likely lead to much larger losses.

In order to compare the present situation with these historical periods we will consider various scenarios for a specific US government bond. We will focus on the 30-year bond with a coupon payment of 4.75% that matures on 2/15/38, which traded at about $1269 on 1/20/09. The yield to maturity (investment return if held to maturity) was 2.986% per year. In order to see how the price of this bond may evolve in the future, we will consider several interest rate scenarios that assume an economic recovery and one deflationary scenario.

The most likely scenario is that the government stimuli succeed and interest rates return to more normal levels as the economy and inflation pick up. If rates return to 5%, still a low yield for a 30-year US treasury, the value of our bond would decline about 29% to $900. The last time this bond traded near such valuations was only about 7 months ago.

Normally when the Fed floods the economy with money, inflation picks up quickly once the recovery begins. If this happens this time around, interest rates may need to be around 8% or higher to contain the problem. Yields in this range are quite plausible. They were the norm for the period from the mid ’70s to the mid ’90s. At 8% the bond would be worth about $590, which is a 54% decline from its present value. To put this into context, the S&P 500 declined about 47% from its May 2008 high to its November 2008 low and the declines in our historical examples were only about 14%.

A decline of this magnitude would have enormous repercussions. Supposedly safe bond portfolios held by pension funds, trusts, foreign countries (especially China), and individuals would be cut in half. Such drastic price changes are expected for stock portfolios, but for bonds price moves of this magnitude would be unprecedented.

On the other hand, there is one scenario that makes current bond prices look attractive. If the government stimuli fail, we may enter into a long deflationary period. If this happens, long-term interest rates will stay at present levels or continue to decline. If yields were to decline to 2%, the lowest they have ever been, the value of the bond would change to $1569, corresponding to a 24% increase in value. Investors buying bonds are current levels are speculating on long-term deflation, a low probability event with limited payout since interest rates can’t go below zero, but substantial risk since there is no limit to how high they can go.

We believe that over the 30 year life of the bond the economy will recover even if there is a deflationary period in our immediate future. Consequently long-term investors who buy bonds at present prices will most likely have to choose between holding the bond to maturity and watching the purchasing power of their investment erode due to inflation, or selling it at a steep loss due to higher prevailing interest rates at the time of the sale.

There is a certain irony in the fact that an investor who believes that the economy will recover would be unwilling to lend money to the US government at currently prevailing rates (i.e. buy a bond at market price), while an investor who believes that the stimuli will fail and that we are facing 30 years of deflation would be happy to fund as many stimulus programs as the government cares to put on.

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Bid Bond

The decision makers in Bonding Companies are called underwriters. These individuals are charged with the responsibility of only providing bonds for applicants that appear to present no potential of causing a bond claim, loss or expense. Other than with a crystal ball, what are the criteria underwriters use? What causes them to immediately decline an account?

 1. Start with the financial statement. If there is no financial statement, or if you obtained a tax return “in lieu of,” it’s a flag because all but the smallest bonds require a CPA prepared financial statement.

 2. On a CPA statement, does the first sentence of the cover letter say it is “compiled?” That’s a flag if the bonds needed are more than $250,000 each. Above these levels, sureties want a “review” or “audit” financial presentation.

 3. Look on the Balance Sheet. If current assets minus current liabilities are a negative number, or if total stockholders equity is negative (numbers stated in parenthesis are negative), that’s a big flag.

 4. Look on the Profit and Loss Statement; it’s a flag if net income is a negative number.

 5. If the Contractor Questionnaire states that the company is less than one year old – Buzzzz! It’s a problem. Most underwriters require that their new clients have survived in business at least a few years.

 6. Also a problem if the company or any of its owners have declared bankruptcy (company or personal.)

 7. Open litigation is a problem.

 8. If the questionnaire says full indemnity of the owners and spouses is not available, that’s a flag. All sureties require this “hold harmless.” It’s one reason bonds are not insurance.

 9. It’s an obstacle if the term of the project needing a bond will be in excess of 2 years.

 10. Also an issue if the new project is more than a 50% increase over the largest job completed in the past.

 11. Subcontractor’s bonds given to general contractors can be a problem if a special bond form is stipulated.

 12. A weak company or personal credit report (all owners and spouses) can prevent surety support. Problem areas are chronic slow pay, collection items, tax liens, open judgments, too many credit inquiries and a low score.

 If any of these factors exist on your account, changing them will improve your likelihood of obtaining bonding support.


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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

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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 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

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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