Today we’re going to talk about a contractor bond known as the New York performance bond. A New York performance bond is often written by the same surety company that issued the New York bid bond.
Let’s say you’re one of five contractors all bidding on the same job. Just like each one of your competitors you have secured a bid bond in order to deliver your bid for the job.
Now you actually in the job! Congrats! Now what?
You will need a New York Performance Bond.
IMPORTANT: Bonds are NOT a substitute for NY contractors insurance. Insurance products are a completely separate products providing a completely different protection for NY contractors.
New York Performance Bond
Where a Bid Bond ensures the “good faith” of a contractor’s work-bid, a New York performance bond ensures monetary compensation to the client in the event the contractor fails to finish the project according to the specifications laid out by the contract (most often due to the default or bankruptcy of the contractor).
If the contractor does default the surety or bond carrier has three options:
- Complete the contract obligations itself through their own contractor,
- Select a new contractor with whom the client will form a new contract,
- Allow client to complete work by their own method using bond payments.
The face value of a performance bond is generally 100% of the contract amount, and the face value is generally increased for each change order.
Most often New York performance bonds are underwritten as part of a “Performance and Payment Bond”. The Payment Bond guarantees that the contractor will pay the labor and material costs they are obliged to under the contract. This benefits the client so if a general contractor defaults subcontractors and suppliers assured of payment and will continue performance as contracted.
The face value of a Payment Bond is often less than the total amount of the contract, and is intended to cover anticipated subcontractor and supplier costs and in some cases mechanics’ lien.
As stated earlier a New York performance bond is most often written with the same surety company that provided the New York bid bond as both bonds are underwritten at the same time even though they are purchased at different times.
If you are looking for quotes on New York Bid Bonds or New York Performance Bonds please call our bonding specialist at (518) 456-6688 or click here to contact via email.