Performance Bond

Our steel erection company (serves as a subcontractor) has just been awarded a contract but it requires a Performance Bond. The bond is not a problem, our credit is fair and we have our contacts for that. The problem lies with the owner, he has been bonded in the past, who thinks that we will give up too much power by being bonded. He says once the bond is in place the general contractor has all the power and they can pretty much do what they want at will. Example: Have our crew arrive on the job 3 days early. Start the decking process before it is necessary. Rent additional equipment that is not needed. Accelerate the job when it is not needed. Hire more employees.
I am told he can do this by threatening to call the bond company or call the bond in? True or not, how do we as subcontractors address the issue?

Thanks

[marietta68]

Originally Posted by Unregistered

Our steel erection company (serves as a subcontractor) has just been awarded a contract but it requires a Performance Bond. The bond is not a problem, our credit is fair and we have our contacts for that. The problem lies with the owner, he has been bonded in the past, who thinks that we will give up too much power by being bonded. He says once the bond is in place the general contractor has all the power and they can pretty much do what they want at will. Example: Have our crew arrive on the job 3 days early. Start the decking process before it is necessary. Rent additional equipment that is not needed. Accelerate the job when it is not needed. Hire more employees.
I am told he can do this by threatening to call the bond company or call the bond in? True or not, how do we as subcontractors address the issue?

Thanks

If the general has such a track record, it would be a good idea for your attorney to review the contract before execution (always a good idea, anyway). Threatening, or actually calling the bond, without cause would be counterproductive, and if the details you're citing aren't addressed in the contract, your attorney can ask for more specificity. The bond company will ask for proof of any claim made by the general contractor and without that evidence, it'll be tough to perfect - on the other hand, this is how frivolous lawsuits are created. As a former agent, now an underwriter, I am familiar with general contractors who've developed a reputation for being very difficult and know that we'll advise smaller subcontractors to forego those jobs - if a dispute arises, a payment hangup could put them out of business - and it happens far more often than it should. Beware.