govcon.forum

How much does a performance bond cost, and does the rate drop once you have a few jobs done?

Ask a question
Asked Active Viewed 1 timeAnswered
Short answer · from the accepted reply
  • Your performance bond rate will drop once you have a few jobs done, especially if they are similar in size and scope to the city park project.
  • The surety company sets the rate based on their risk assessment of your company.
  • This includes your financial health, past performance, and the specific contract terms.
Read the accepted answer
2answers

We are a small landscaping firm, NAICS 561730, and just got our first bid accepted for a city park project. It is a general construction project with a strong maintenance component. The city requires a performance bond and the quote we received from the surety seemed high. Another, larger contractor mentioned their bond rates are much lower. I understand that the Miller Act requires performance and payment bonds for any construction contract above a certain threshold, but this is a city contract. What factors drive the cost of a performance bond, and will the rate drop once we have a few jobs under our belt?

performance-bondconstructionsmall-businessbonding
ShareReport
asked Jo R. Freelance proposal writer · Denver, CO · 405 rep

2 answers

3
Accepted answer

Your performance bond rate will drop once you have a few jobs done, especially if they are similar in size and scope to the city park project. The surety company sets the rate based on their risk assessment of your company. This includes your financial health, past performance, and the specific contract terms. Marcus is right that city contracts are not subject to the Miller Act, which applies to federal construction contracts above a certain threshold. For city work, the city's procurement rules dictate the bond requirements. You will need to check the city's procurement portal or the solicitation documents for the exact requirements.

ShareReport
answered Tom B. Construction estimator, public works · Phoenix, AZ · 225 rep
Thanks, Tom. I will check the city's procurement portal for bond requirements. I appreciate the clarity on the Miller Act and city contracts. · Jo R. ·
1

The rate for a performance bond depends on your firm's financial strength and experience, and yes, the rate can drop as your company builds a track record of successful performance. Your financial standing, including cash flow, working capital, and credit history, directly impacts the surety's risk assessment. The surety also looks at your past performance on similar projects, including your ability to complete jobs on time and within budget. Since this is a city contract, the city's specific requirements will dictate the bond amount and type, which can differ from the Miller Act requirements that apply to federal contracts. As your landscaping firm successfully completes more projects, especially those with similar scope and size, you demonstrate your capability and reliability to the surety. This improved track record reduces the perceived risk, which can lead to lower bond rates in the future. Keep good records of all your completed projects.

ShareReport
answered Marcus T. Verified vendorOwner, janitorial and facilities firm · Columbus, OH · 388 rep

Your answer

Sign up to answerCite the FAR clause or procurement code where you can.

Related questions