A surety bond is a risk transfer mechanism whereby the insurance company called the “Surety” assures the project owner called the “Obligee” that the contractor called “Principal” will faithfully perform its obligations in accordance with the contract entered into between the two parties (“Principal Contract”).
A surety bond is a vital component in the construction industry’s success. A concrete recognition of this is the fact that a bond is a statutory requirement in government infrastructure and construction projects. It provides financial security to the Obligee by assuring that in case of default of the Principal or worse becomes bankrupt, the Obligee can go after the Surety for indemnification.
Types of Cover
Federal Phoenix has a wide variety of contract surety bond products that are available to general contractors, specialty contractors, sub-contractors, suppliers and construction project managers.
Bidder’s Bond – Undertakes to guarantee that the successful bidder, within a specified period from the date of receipt of the Notice of Award, shall:
- Enter into contract with the Obligee.
- Furnish a Performance Bond for the faithful and complete prosecution of the work specified in the contract.
A bid bond shall answer for the: (1) cost to conduct another bidding; and (2) amount difference between the winning bid and next lowest complying bid.
Performance Bond – Guarantees the construction and completion of a project in accordance with the approved plans, specifications, terms and conditions of the contract.
A performance bond shall: (1) answer for the cost of delay in the completion of the project; and (2) pay for the additional cost to complete the project. The additional cost of completion is equivalent to the difference between the contract cost to complete the project under the new contractor and the cost of completing the project under the old contractor.
Surety Bond (Downpayment) – It is also known as DOWNPAYMENT or ADVANCE PAYMENT Bond. It guarantees the recoupment or repayment of the unliquidated portion of the downpayment made by the Obligee to the Contractor.
Surety Bond (Guarantee) – It is also known as WARRANTY Bond. It is a pre-condition before the Obligee will release the retention money to the Principal. It guarantees the correction and repair of hidden defects in the workmanship and materials used by the Principal in the project, found or becoming evident within one year from the date of certificate of acceptance of the project.
In order for us to provide a QUOTE, we need to review the following documents:
- Principal Contract – This is to determine the nature of undertaking we are going to guarantee.
- Latest Audited Financial Statements filed with the BIR
- Completed and signed Bond Application Form
In order for us to ISSUE the requested bond, the following documents must likewise be submitted:
- Completed and signed Co-Signer’s Statement
- Copy of the Articles of Incorporation, Articles of Partnership and DTI Registration, whichever is applicable.
- Copy of Board Resolution authorizing the Signing Director/Officer to bind the Applicant
- Copy of two (2) Government Issued ID’s of the Signing Director/Officer
In order for us to RELEASE the requested bond, the following must be satisfied:
- Payment of the premium due
- Completed and signed indemnity Agreement
- Submission of the completed and signed Indemnity Agreement
- Policy application is subject to the approval of Federal Phoenix
- Federal Phoenix will send you a free QUOTE based on the information stated in the insurance application that you have submitted to us.
- Actual premium is only confirmed upon formal request for policy issuance and we reserve the right to adjust final and/or applicable premium as deemed necessary without notice.
DISCLAIMER.This web page does not amend, otherwise affect the provisions or coverage of any bonds issued by Federal Phoenix. It is not a representation that coverage does or does not exist for any particular claim or loss under any such policy or bond. Coverage depends on the facts and circumstances involved in the claim or loss, all applicable policy or bond provisions, and any applicable law. Availability of coverage referenced in this document can depend on underwriting qualifications and state regulations.
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