How much does the job need to be?

I work for a non profit organization that refers contractors for jobs ranging from $3,000 - $10,000. Can I look for our contractors to provide performance bonds for each of these jobs and if so will it be costly to the contractor, or should I request a performance bond for just or company and would that cover the customer whose funds we only hold and administer from an escrow account? In essence the contract is between the customer and the contractor and we are the lender.

[marietta68]

Originally Posted by Rehab Administrator

I work for a non profit organization that refers contractors for jobs ranging from $3,000 - $10,000. Can I look for our contractors to provide performance bonds for each of these jobs and if so will it be costly to the contractor, or should I request a performance bond for just or company and would that cover the customer whose funds we only hold and administer from an escrow account? In essence the contract is between the customer and the contractor and we are the lender.

First thought is that those contract amounts would be too small to bond - there's not enough premium to generate sufficient income to either an agent or a bond company.

Second thought is that the bond premium is paid, either directly or indirectly, by the obligee. A smart contractor isn't going to absorb the expense of a bond that's issued for the benefit of the owner. This is why bond rates are so important to contractors because having to factor in the cost in a competitive situation affects the outcome.

Third thought is that if you're acting as an administrator/general contractor, you should be satisfied with the work that's been performed before paying the contractor. Whomever is performing the inspections must be qualified to do so, thus enabling you to authorize both progress and final payments under the terms of the contract.

[Admin]

marietta hit the nail on the head!

The bond amount will make obtaining the bond an impossibility, as anyone writing it would lose money by doing so. I suggest requesting a cash deposit or letter of credit.