1. Construction & Beyond Surety Bonds For Public Works

2. Why Bonds Are Required Miller Act of 1935 –For federally funded public works projects over $100,000 “Little Miller Acts” –For state & local public works projects

3. What is a Surety Bond? Surety ObligeePrincipal

4. Surety Bonds Vs. Traditional Insurance Surety BondsInsurance 3-party2-party Risk transfer Duty to obligeeDuty to insured Regulated by State Insurance Departments Premium fee for prequalification services Premium actuarially determined Project specificUsually term specific Penal sumPolicy limits

5. Elements Of Prequalification Capital Capacity Character Capital Capacity Character

6. Capital: Financial Strength Capital Financial statements Working capital Work-in-progress Indemnity

7. Capacity: Ability to Perform Capital Financial statements Working capital Work-in-progress Indemnity Capacity Resumes Contingency plan Business plan- short & long term Equipment

8. Character: References & Reputation Character Reputation Relationships References Capital Financial statements Working capital Work-in-progress Indemnity Capacity Resumes Contingency plan Business plan- short & long term Equipment

9. Role of the Underwriter Look at obligations Determine the risk Provide capable principal Underwriter

10. Obligee’s Responsibilities Term of the agreement Timely & adequate payment Adequate insurance Payment of property taxes Protect value of contract as an asset Obligee

11. Contract Surety Bonds Bid bonds Performance bonds Maintenance bonds Payment bonds Supply bonds

12. Commercial Surety Bonds Court bonds License & permit bonds Public officials bonds Bonds protecting the federal government Miscellaneous bonds

13. Underlying Agreement Primary instrument to establish risk associated with the guarantee Requirements contained in the contract documents

14. Benefits of Surety Bonds Protects the interest of labor & vendors on construction projects Surety company assumes the responsibility of investigating & validating claims Surety Bonds

15. Functions of Surety Bonds Competitive bidding process “On time performance” Saves tax dollars Surety Bonds

16. An Owner’s Guide To The Surety Claims Process

17. When Problems Arise.... Keep the surety informed of the principal’s progress If principal defaults, submit written declaration of default Allow the surety time to investigate the claim Obligee

18. Surety’s Responsibilities In a Claims Situation Principal’s contractual obligations Obligee’s contractual obligations Principal’s defense Whether the obligee has met its obligations Surety

19. Managing The Claims Process Be cognizant of legal position Avoid improperly worded letters Written notice of known problems Ask for a specific response Obligee

20. Surety Responsiveness Be reasonable in your expectations Be diligent in providing notice & maintaining records Contact insurance commissioner Obligee

21. The Advantages Of Surety Bonds Qualified vendors Competitive pricing Timely contract performance Quality product Protection against defective materials & workmanship Surety Bonds

22. The Advantages Of Surety Bonds Protect taxpayer dollars Financial recourse Insulates public officials Efficient management of public works administration Surety Bonds

23. Your Surety is Your Consultant Financial Security Qualified Principals

24. For More Information Surety Information Office www.sio.org | sio@sio.org SIO is a joint initiative of The National Association of Surety Bond Producers (NASBP) and Surety & Fidelity Association of America (SFAA).