Contractor Versus Surety Liability on Performance Bonds

[morning]

Situation: A contractor on a federal contract is terminated for default and the surety elects not to take on the completion of the contract themself. The federal agency conducts a competitive bid process to complete the effort, and the results of these actions increase the cost to the government beyond the performance bond. If the bonding company was to pay the government for the amount up to the performance bond amount does the bonding company then assess these additional costs to the original contractor, and does the government assess the above bonding amount directly to the contractor, thus resulting in the contractor being obligated for the full amount of the excess costs ?

Secondly it is my understanding that the government can simply lay the entire debt directly to the defaulting contractor.

Thanks

[Surety Queen]

Originally Posted by morning

Situation: A contractor on a federal contract is terminated for default and the surety elects not to take on the completion of the contract themself. The federal agency conducts a competitive bid process to complete the effort, and the results of these actions increase the cost to the government beyond the performance bond. If the bonding company was to pay the government for the amount up to the performance bond amount does the bonding company then assess these additional costs to the original contractor, and does the government assess the above bonding amount directly to the contractor, thus resulting in the contractor being obligated for the full amount of the excess costs ?

Secondly it is my understanding that the government can simply lay the entire debt directly to the defaulting contractor.

Thanks

When a contractor defaults on a bonded job, it is the Surety's decision whether they will take on the completion or not. If they choose not to, and the government gets it done, the Surety will be responsible for the completion - including the additional costs to the original contractor. At that time, the Surety will most definitely go back to the contractor to recoup the additional costs. Bottom line? The contractor is responsible for the entire project!