North Carolina Performance Bonds

performance bond - What is a Surety Performance Bond in North Carolina

What is a Surety Performance Bond in North Carolina?

A surety performance bond establishes that a contractor or subcontractor has the capability and intent to fulfill obligations under their contract. It also ensures compliance with North Carolina Law for all project contracts requiring such bonds.

This bond secures payment to workers who have been laid off due to non-payment of a contractor or subcontractor who has been awarded a public works project. In North Carolina, the bond must be in an amount equal to one and one-half times the value of the contract between the awarding authority and its contractor. For projects with a value less than $400,000, it may be in a reduced amount at the discretion of the awarding authority.

A “public work” is any construction or improvement that will benefit a governmental entity such as cities, counties, schools districts, etc. The term does not apply to residential or commercial improvements which do not affect government entities.

In order for a current public works project to qualify under this law, there are several requirements:

1) Substantial Completion must have been attained on the public work.

2) There must be a final certificate of Substantial Completion.

3) The subcontractor or contractor has not been paid in full for all work and materials furnished, and (if required by applicable statute, ordinance, or regulation), a notice to withhold funds has been issued against the awarding authority and acknowledged in writing by its duly authorized representative. It is within the awarding authority’s discretion whether this step needs to occur before the bond may be posted.

4) The subcontractor or contractor files suit for payment with any court having jurisdiction over such a public works project through which payment is sought, and such suit shall have remained pending for thirty days without being settled or dismissed.

Just how much does a Surety Performance Bond in North Carolina?

Bond amounts can vary based on your business location, line of work, and what other conditions may apply according to your state’s Department of Insurance. For example, if you are applying for an Auctioneer’s license which requires licensing in multiple counties then you could potentially have five different minimums displayed at different locations throughout NC.

There is no way to predict your actual premium without knowing all of these facts. During our phone consultation we will be able to determine your exact premium within minutes, so please contact us for further details if you have immediate needs.

The best option for those who need to purchase a bond quickly is to contact us directly. We can offer you up to $1 million in surety performance bonds the same day you apply, even if you have never dealt with our company before.

What’s the process to get a Performance and Payment Bond in North Carolina?

Performance and Payment Bonds are requested by the Owner, not the contractor; however, the owner must provide notice to DOT of its request for a Performance and Payment Bond no later than thirty (30) days after requesting proposals or receiving invitations to bid from contractors. In general, a Performance and Payment Bond is required when: 

There exists a construction contract where the amount of such a contract is more than Five Hundred Thousand Dollars. The original contract has been terminated in whole or part or there exist termination settlement agreements with one or more contracting parties in connection with a project under a public-private agreement that requires payment in excess of five hundred thousand dollars. 

A material change has occurred in the scope of work, location, or method of construction for a contract that was awarded to a contractor after the project notice to proceed, materially alters the estimated total cost of either or both labor and material, or seriously affects compliance with applicable codes and design standards. For projects funded under the Federal-Aid Highway Act of 1956, as amended (23 U.S.C. 115 et seq.), a 

The bond must be filed within two (2) years immediately succeeding completion by the Contractor of all work called for by the contract, or any termination thereof, except that if any litigation is brought to enforce rights on such bond, then filing is timely if made not later than ninety days after the final termination of such litigation. When required by law, the bond must be filed prior to the commencement of work on the project. 

The bond requirement may also include additional suretyship or collateral requirements if deemed necessary by the Department. The Performance and Payment Bond must be executed by a corporate surety authorized to do business in North Carolina which has an A.M Best Rating of “A-VII” or better, but shall not exceed ten million dollars ($10,000,000) unless the contract is fully funded with federal transportation funds or made subject to federally mandated self-insurance retention levels that are lower than this amount.

How to Get a Performance Bond in NC?

Getting a performance bond in North Carolina is a common requirement for many types of businesses that operate in the state. You can obtain one from a bonding company or your insurance agent, but you need to be aware of all your options before making a final decision. Contact an insurance agent today to get started on this process.

People often misunderstand what these bonds are and confuse them with payment bonds, which guarantee that a client’s payments will be made to workers on a project.

A performance bond is only given if the client believes you haven’t met their requirements, and your failure could cost them money (or more). If they believe you’ve completed those requirements satisfactorily, they might not require one before continuing with the work. 

This is why it’s so important to always do great work for every client, as even one slip-up can cause problems down the road. You want to develop such good relationships with clients that they never feel the need to request a bond from you.

Getting bonded assures clients that you run an efficient and stable business model. This means they’ll be able to trust you more down the road with bigger projects and more money on the line since they know your company is solvent (i.e., capable of paying out when needed). It could lead to repeat customers who refer others, customers, in turn, which will help grow your company’s client base over time.

Where can I get a performance bond in North Carolina?

Collectors of North Carolina may require performance bonds when working with contractors or suppliers. This is outlined in Article 15 (a) (2) (i) of the North Carolina Department of Environment and Natural Resources’ Rules Governing Adequacy Assurance Requirements for Owner-Performed Construction, to be a contractor for a construction project “shall give a signed statement from one or more public liability insurers who have issued thereon standard comprehensive general liability insurance policies to the effect that they will pay on behalf of such principal any final judgment recovered against such principal by reason of bodily injury, including death at any time resulting therefrom, personal injury, and property damage arising out of work done under the contract to be performed by such principal.

A performance bond is a type of insurance policy that protects the public from any losses caused by a contractor. Most states require contractors to provide these bonds when working on public projects and ensure that they will follow through with their contractual obligations before getting paid.

Visit Executive Surety Bonds to know more about performance bonds!

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