The contract is awarded and the work is ready to be initiated. If the contract is not completed on time, there may have financial imparkations on the contractor by the Project Owner. In any case, the contractor is on the high risk of financial loss if the project is not completed on time or delay due to any unforeseen circumstances. There are several things that can be done by a contractor to lessen the risk of financial loss.
For every construction project initiated, it is vital to have a construction bond for the project. Contractor Bond is a legal document created between the project owner and the contractor to initiate and complete the work as per the defined terms and conditions. It has many benefits for the contractor as well as the business:
- Assurance: When the contractor bond is applied during the construction, it gives an assurance to the project owner that the work will be completed as per the requirements and there would not be any delay for the delivery of the project. It can also be created to assure the timely payment for material, supplies, labour and subcontractors.
- Legality: Project owner always wants an assurance that the work is completed on time and as per the requirements, so all the important points are listed on the bond paper so that any party cannot divert from the main objective of the project.
- Surety: When a contractor bond is in place, it provides a surety to the project owner and the construction company that the work will be done as per the requirement and the payment will be done according to the points agreed to in the contract.
- Unbiased Decision: Whenever, the contractor bond is created, it involves three parties, obligee (Project owner), Contractor Company and the company that backs the contractor bond basically known as Surety Company. Whenever, Surety Company is involved it makes unbiased decision which will be in benefit of both the parties.
- Quality Assurance: When the contractor bond is signed, it provides guarantee to the project owner that the work will be completed with utmost quality and as per the requirements of the business.
Contractor bonds helps the companies to define the timeliness for the completion of the project and also provide a surety for payments been released as per the terms defined. Through a contractor bond, everyone gets benefited, for project owner the requirements are met as per the requirements and for the contract company the payment for the construction and other related payments are released easily.