Any contract between two parties carries the expectation that both will live up to their end of the bargain. Unfortunately, this is not always the case. Performance bonds were developed in the early 20th century as a way to protect developers in the event that a contractor fails to finish a project. As a contractor you will need to furnish a payment bond and a performance bond for each project you undertake. One of the lessons you will learn from Contractors Exam, Inc., is how to navigate the bonding process successfully. When you finish your lessons with us, you will immediately be ready to participate in the booming Nevada construction industry.
Contractors Exam, Inc. works with the Nevada State Contractors Board.
Performance bond origins
Performance bonds were legislated into existence in 1935 via the Miller Act. The Miller Act was passed several years into the Great Depression, after numerous companies across industries had folded. The terms of the law required that, before beginning a project contracted by the Federal government, a contractor must furnish both a performance bond and a payment bond.
The performance bond protects the developer in the event the contractor does not finish the job as promised. The payment bond protects the contractor in the event the developer either becomes insolvent during the project or fails to pay when the work is completed. In this manner, both parties are protected from financial loss.
A general rule of thumb regarding bonds is that contracts under $1 million cost around 3.5% of the contract value to become bonded. Above $1 million, the bond cost is generally below 5%.
In the event a developer files a claim against a performance bond, the bonding agency pays the developer; the contractor who was bonded is then responsible for compensating the bonding agency.
Federal projects require bonding for contracts exceeding $100,000. However, many other localities at the state and city level require them for smaller contracts, as well.
Why Should I Become Bonded?
Among contractors, having established bonding is a boon to your name. It shows any potential clients that you take the quality of your work seriously. Even in the worst possible circumstances, your clients will know they’re legally and financially protected. Not every contractor is reputable or honest. Being bonded is a testament to your honesty as a contractor.
We’ll help you through the bonding process
In the state of Nevada, performance bonds will be required for every large development project. While dealing with bonds may seem confusing or intimidating at first, we promise you’ll come to understand it quickly. Contractors Exam, Inc. will help you with all the paperwork you need once you’ve passed your licensing exam. We will guide you through the process. Establish your own self-proprietorship and complete the bonding process. Join Nevada’s booming construction industry as it recovers from the COVID-19 pandemic and returns to previous activity levels. For more information, contact us via our website, or call our Las Vegas office at (702) 949-7277.