Explain the Statements about the Construction Contract Process
I. Surety bond assures the project owner a guarantee of funds equivalent to a promissory note. The surety bond is a promise to pay the owner a certain amount if the contractor fails in fulfilling the terms of a contract.
II. Performance bond is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor. Performance bonds are issued upon Contract award and cost approximately 0.50% to 1.25% of the total contract value.
III. Builder's risk insurance is a special type of property insurance which indemnifies against damage to buildings while they are under construction. Risk insurance of Builder is coverage that protects a person's or an organization's insurable interest in materials, fixtures and/or equipment being utilized in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered cause
IV. A bid bond is issued as part of a bidding process by the surety to the project owner, to assurance that the winning bidder will undertake the contract under the terms at that they bid. The cash deposit is subject to full or partial forfeiture if the winning contractor fails to either execute the contract or provide the required performance and/or payment bonds. The bid bond assures and assurance that should the bidder be doing well, the bidder will execute the contract and provide the required surety bonds.
V. Bonds are not insurance. Bonds are a guarantee to pay made by a cosigner who is liable only if the principal fails to discharge the obligations under the Contract.