Learn the basics of surety bonds
A surety bond for a public construction project is a three-party written agreement under which the surety guarantees a government agency that a general contractor will execute work according to contract terms.
Government agencies require contractors purchase surety bonds to ensure project completion and to avoid the risk of default and project delays.
For more in-depth information about surety bonds, visit our Surety 101 page.
Surety Protects Taxpayers, Improves Cost Efficiency
Surety bonds deliver exceptional value for public construction projects: reducing costs, protecting local businesses and improving efficiency.
Here’s are just a few examples of surety’s value:
- Default protection: Unbonded public construction projects are more likely to default than surety bonded projects – perhaps by 10 times.
- Lower cost of completion: And when defaults occur, unbonded projects cost 85% more to complete and take nearly twice as long to complete compared to bonded projects.
- Value outweighs cost: According to economic analysis by EY, the overall value of surety bonds more than covers their costs across a bonded portfolio of construction projects.
- Improved contractor pricing: Three-in-four developers surveyed by EY reported surety bonding reduces contractor pricing thanks to greater project certainty.