What is a Surety Performance Bond in Ohio?
A surety performance bond in Ohio guarantees that a contractor will carry out the terms of their contract. It protects both parties involved in a construction project during and after its completion. The bond essentially ensures that workmanship is up to par, deadlines are met, and payment for labor and materials is made on time.
A performance bond is a type of surety bond required by Ohio law when a contractor or subcontractor is utilizing public funds for the construction, alteration, improvement, demolition, installation, or removal of facilities. This includes contractors and subcontractors that are paid in whole or part with federal funds and/or state funds, including Jobs and Family Services (JFS) through any county, Ohio Department of Transportation (ODOT), Public Works Commission (PWC), and Public Utilities Commission (PUC). A performance bond ensures that amounts owed to all persons supplying labor or material for the project shall be paid if the principal becomes insolvent before payment has been made. The contractor can either provide its own surety company which will issue bonds directly to counties on behalf of the contractor, or a public entity can require that all contractors and subcontractors provide a performance bond from an approved surety company.
Just how much is a Surety Performance Bond in Ohio?
The Contractor Performance Bond is a type of Bail Bond that guarantees the performance of your contract. By requiring this bond, the Owner places an added layer of security on the project and can show potential bidders he intends to protect his interests and not give away the job to the lowest bidder no matter how good their price may be.
Many people think that all they need to secure a bid is a cashier’s check, but if you place one small misprint in your contract or fail to fully complete it, there could be problems later over who is responsible for those mistakes. If you as a contractor are required by law to carry liability insurance, then you should also have a surety company involved in your contracting process as well. The bond protects the Owner in cases of non-performance by protecting them against financial loss. If you fail to perform, the surety will assume responsibility and complete or correct your work so that it falls within the scope of your bid.
The Contractor Performance Bond must be written for 100% of the bid price. The bond amount is determined by several factors, including; state requirements, project cost, past experience with other contracts in Ohio and/or other states, licensing (B & O tax) status, the principals involved in the contract (individuals or corporations), possible subcontracting, etc.
What’s the process to get a Performance and Payment Bond in Ohio?
All contractors must complete certain steps before being able to apply for a Performance and Payment Bond. In order for you as a contractor or subcontractor to receive this type of bonding, there are several formalities that you must meet first:
- Ensure that your company name, address, and phone number are up-to-date with the Ohio Secretary of State.
- Ensure your master surety bond number is up-to-date at the Ohio Department of Insurance.
- Verify that all general contractors required by law to be on this project have their information submitted to the Division of Industrial Compliance.
- Ensure that you or any subcontractor(s) you want to use on this project has not had a license revoked within the last three years. If there was an investigation into these violations, it can take several months for them to be publicly posted on 1/31/2011 Ohio Checkbook created by Governor Strickland as an online database for state spending through 2013.
- Ensure all of your subcontractors are certified by the Division of Industrial Compliance for this project.
How to Get a Performance Bond in Ohio?
1) Contractors must complete the application process to become Licensed / Registered contractors in Ohio. Visit The Ohio State Board of Contractors (OSBC) website for more information on specific state requirements.
2) Applicants can learn about the forms of surety bonds that are approved by the Division of Purchase & Contracts here.
3) The current conditions for obtaining one of these performance bonds are listed on the DAPC webpage linked above. Attention Ohio contractors: Review your company’s licensing status regularly to ensure compliance with all applicable laws and regulations, including those issued by the Division of Purchase & Contract.
Where can I get a performance bond in Ohio?
Ohio Attorney General Mike DeWine announced on February 22, 2007, that the office is now offering bond filing services for financial institutions. This service has been made available to Ohio’s banks, savings and loans, credit unions, and other financial institutions.
The Ohio Attorney General Office currently acts as the guarantor of last resort for these types of bonds. Although the State of Ohio cannot replace lost principal or secondary guarantees, it can assist in recovering outstanding obligations. The cost of this protection is minimal relative to the amount guaranteed, typically providing coverage at less than one dollar per $10,000 insured with no annual fee or mileage charge. High net worth individuals also have funds protected under this program.
This service was offered as a result of the enactment of Senate Bill 80 (SB 80). Since its passage in October 2003, the State Treasurer has paid more than $8 million in claims to Ohioans insured under the program. During 2005 and 2006, Ohio’s banks and credit unions filed 40 percent of all financial institution bonds which were guaranteed by the state.