Non-construction performance (NCP) bonds are surety bonds that guarantee contracts unrelated to a building or construction job. Usually provided by a bank or insurance company, they are issued to one party of a contract as a guarantee against the failure of the other party to meet the obligations specified in the contract. Examples of non-construction performance bonds include janitorial services and landscape maintenance.
The cost of a non-construction performance bond is usually a small percentage of the bond’s total, depending on the applicant’s credit and history with bonding.
A contractor is asked to provide a non-construction performance bond to reassure the contractor will provide the services or supplies as written in the contract. Non-construction performance bonds give financial protection to the obligee. As with any surety bond, if there is a default that results in a loss by the surety company, the surety will expect the principal to repay any money paid out in case of a claim. Surety bonds are not insurance.
There are a few types of non-construction performance bonds, and here are the most common:
Non-construction performance bonds may be purchased from any reliable surety company. You must complete the appropriate application and submit it with a copy of the contract, a request for proposal (RFP), or bid specs. Most surety companies will also ask for business and personal financial statements if the bond is for more than $75,000.
Non-construction performance bonds are not renewed but are tied to a contract, so they remain in effect for the duration of the contract. If there are any cost overruns, the surety will bill the principal for any additional amount required.