Contract Bonds
Contract bonds are one of the most common types of surety bonds that help businesses perform better, increase their sales, and do business development. How does it work? Well, if you want to bid on projects or do contracts with clients, you may want to get some extra representation that you are good for your word. If somebody hires you to build a building or to fix a road or to repair a computer system and they commit to a certain amount of money to do that, it’s more than just the money they’re putting at risk. They’re also putting the performance and delivery of that service at risk.

Importance of Surety Bonds
For example, if you bid on fixing a computer system and halfway through the job you quit and bail on them, now not only are they maybe out some money, but now they can’t have that result that they were counting on by a certain date. So, if you can bring to the table a surety bond as a company, as a vendor, as a supplier in your sales process, you can show that potential customer that you are taking it seriously. Now, in some cases, it’s required. The Miller Act is a law that requires for government contracts to be protected under a surety bond, making sure that the taxpayers are secure. They’re protected in case you go south; the job’s going to be completed.

Private Contracts and Surety Bonds
More and more private contracts are also including the surety bond because if it’s good for the government, it’s good for private companies too. Even if it’s not required, if you can get a quote on a bond in advance of making your bid and factoring it in, it’s probably not going to be a lot of money. Your bid might not be the lowest, but if it includes a surety bond and the other ones don’t, you might be shuffled to the top of the list.

Real-Life Example
We had a client a couple of months ago that was bidding on a very large contract to install and construct a very expensive computer network for an artificial intelligence production company. It’s going to be several million dollars to provide the computers, the networks, hook it all together, build the racks, install it, permits, everything. They knew that there were some kind of fly-by-night companies that were trying to undercut their bid by just using less-than-ideal parts, using cheap labor, and it wasn’t going to be a quality product. They knew they would be outbid. So, what they did was they got a quote on a surety bond for performance bond coverage. For the $2 million project, I think the bond cost, you know, $3,000 or $4,000. Actually, it was more than that; I think it was about $8,000. They included it in their bid, just raised the price of their bid a little bit, and said, “By the way, it includes a surety bond to guarantee performance of this by a certain date.”

Winning the Bid
They were awarded the contract, they started working on it, and as they’re working on it, they were talking to some of the employees and executives. They said, “You were the highest of all the bids. We didn’t take the lowest bid, but the other ones were companies that did not have a surety bond, plus you had a little more experience.” So, that surety bond put them over the edge, and it really didn’t cost them any money because they factored it into their cost structure.

Conclusion
So, if you’re bidding on a project, don’t forget to use a surety bond as a way to win a bid on a project and to get more sales. Talk to your sales department about it. Ask the clients whether having that kind of protection would help them favor your bid over other ones. Thank you for reading.