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Non-Construction Performance Bonds
What is a non-construction performance bond?
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.
How much does a non-construction performance surety bond cost?
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.
Why do I need a non-construction performance bond?
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.
What are the types of non-construction performance bonds?
There are a few types of non-construction performance bonds, and here are the most common:
- Service Contract Bonds – Service contract bonds relate to a service being provided. These may include security, landscape, window washing, pest control, waste hauling, food service, street sweeping, etc.
- Supply Bonds — Supply bonds guarantee the delivery of material, equipment, or other supplies as the contract outlines. These types can include office/school supplies, flooring, fencing, work trailers, computer equipment, irrigation equipment, generators, software, wireless installations, among others.
- Maintenance Bonds — Maintenance bonds are set for a specific period and ensure the property owner or landowner will be compensated for any issues with workmanship, materials, and design after a completed construction project.
How can I get a non-construction performance bond?
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.
What else should I know about non-construction performance bonds?
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.
https://www.gsa.gov/forms-library/performance-bond-other-construction-contracts
https://www.investopedia.com/terms/p/performancebond.asp
https://www.gsa.gov/cdnstatic/miller_brochure.pdf