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Construction Bond Claims - Part 3

posted on 01.24.2022

So far, we have covered Bid Bonds and Payment Bonds. For our third and final exploration of bonds claims, we will take a look at Performance Bonds.


Performance Bonds, a common type of surety bond, are issued either by a bank or surety company and provide a guarantee that a contractor will finish a project on time while meeting the agreed-upon specifications. Should a contractor fail to deliver on a project, either by not completing it or otherwise failing to meet their obligations, the developer of the project can attempt to recover their losses by demanding payment equal to the bond's value. This is known as "calling the bond."

It's been said that handling a performance bond claim is like driving an ambulance and not a hearse. Every claim has varying levels of urgency, cooperation/agreement among the participants, and unique challenges. 

When a bond obligee, the project owner, decides to call a performance bond, the claims process is set into motion. When a call is made on the performance bond, the first thing the surety company will do is launch an investigation.

The typical process is as follows:

- Acknowledge receipt of the claim and send an intial request to the project owner for information and documents;
- Send an intial request to the principal for documented position;
- Review the underwriting file, which is comprised of a credit file and a bond-specific file;
- Review the contract documents and bond form;
- Perform an accounting of remaining bonded contract funds;
- If appropriate, assemble an investigative team, which can include outside legal counsel, a construction consultant, and sometimes an accountant; and
- Attend a site visit and in-person meetings.

If the surety company determines that conditions have been met when the performance bond is called, they will then move on to one of four different options for handling the situation:

1.) Help finance the principal,
2.) Find a new contractor,
3.) Complete the project, or
4.) Do nothing.


The right surety partners will work with contractors to avoid claims, and if the situation is unavoidable, to mitigate the severity of it. Choosing the right surety with a track record of resolving claims while minimizing legal fees is important for any contractor to consider. 

Odds and Ends

Absolutely Last-Minute Gift Ideas

posted on 12.24.2021

It's the most wonderful time of the year, but it can be stresseful for those in your life that are hard to buy for,, especially those in teh construction trades AND if you're one of the absolute last-minute shoppers out there still crossing names off your list! We're here to make the process easier for you or your loved one with 10 more gift ideas: 


1.) Werner Ladder Tool Lasso with Belt Clip (Amazon, $14)

2.) Bosch Cordless LED Work Light (Menards, $59)

3.) Little Giant Ladder - Telescoping Mult-Positions with Leg Levelers & 22-Foot Reach (Lowes, $289)

4.) Custom Construction Worker Bobblehead (Etsy, $90+)

5.) Florida Coast Canvas Tool Bag (Home Depot, $44)

6.) Plus-Plus Tube - Basic Mix - 2D & 3D Puzzles for ages 5-12 (Camp.com, starting at $7) 

7.) 4-pc Construction Truck Bedding Set (Target, $100, Twin-size)

8.) SmartCharge 2-Port USB Vehicle Charger (Best Buy, $20)

9.) Personalized Construction Digger Night Light (Etsy, $23+)

10.) Milwaukee Workskin Mid-Weight Balaclava Face Mask (Home Depot, $30)


While we can't guarantee that gifts are available locally for pick-up or, if ordered online, will arive bright and early on Christmas morning, we can guarantee that those receiving any one of these listed gifts will completely love them. We hope our gift lists have helped in your holiday shopping, and if you are out still searching for the perfect gift this Christmas Eve, we hope it's stree-free and what you are looking for is in stock.

From all of us at the Minnesota Builders Exchange, we wish you and your loved ones a very happy holiday season!


*Prices may vary from when this post was published

Construction Bond Claims - Part 2

posted on 12.20.2021

Everyone appreciates getting paid for the work that they do, but rarely do employers have to take out a special type of bond just to guarantee that they’ll pay their employees, subcontractors, and suppliers. This is where a Payment Bond steps in, the second type of construction bond we are exploring this week. 


To start, what is a Payment Bond? A payment bond is a type of surety bond issued to contractors that guarantees all entities involved with the project will be paid. A payment surety bond is a legal contract, a type of bond, that guarantees certain employees, subcontractors, and suppliers are protected against non-payment. Other common names for these include "construction", and "labor and material". In government contracting, these bonds are sometimes referred to as "Miller Act Bonds".

A payment bond is one type of surety bond that most government projects require of all contractors bidding on their projects. Surety bonds are also becoming more popular on commercial projects.

A payment bond claim arises when the principal (known also as the contractor) fails to pay subcontractors, laborers, and/or suppliers. Generally the surety has the right to assert all of the principal's defenses as well as its own surety defenses --- which commonly include notice and time limitations. Notably, the bond provides recourse for only proper "claimants," so the principal and surety need to confirm the claimant has standing to pursue the claim. The project owner, or person hiring the contractor, will indemnify themselves through this type of surety bond in-case they become liable for unpaid employees, subcontractor or suppliers.

When might you need a payment bond? Payment bonds are typically used in conjunction with performance bonds and are oftentimes even on the same bond form. Contractors purchase payment bonds when negotiating a construction contract to reassure those working with them that they will be paid appropriately and on time.


In short, as long as a contractor has clear means to pay their employees, subcontractors, and suppliers, they should be able to qualify for a payment bond. This will allow the contractor to bid on a much wider range of construction projects.

Odds and Ends

Another 10 Gift Ideas for 2021

posted on 12.17.2021

Only 7 days until Christmas!

Last-minute shoppers, we're here for you. We have another 10 great gift ideas for construction contractors, employees, family, friends, and customers to help guide you in your holiday shopping. Hopefully you either find something on this list that is absolutely perfect or will inspire you to find it.

1.) BEACON Hard Hat Light (Milwaukee Tool, $100)

2.) Colorful & Personalized Construction-Themed Plates (Etsy, $29)

3.) Cooluli Mini Fridge for Car, Office Desk & College Dorm Room (Amazon, $80)

4.) 'I Welded, It Helded' Mouse Pad (RedBubble, $19)

5.) Ironclad All-Purpose General Utility Work Gloves (Amazon, $14)

6.) NoCry Professional Knee Pads (Amazon, $25)

7.) K'NEX Thrill Rides - 3-in-1 Classic Amusement Park Building Set (Amazon, $55)

8.) KNIPEX Compact Bolt Cutters (Wal-Mart, $55)

9.) DEWALT 14-Piece Drill Bit Set (Amazon, $15)

10.) Carhartt High Visibility Waterproof Insulated Jacket (Amazon, $160)


For the absolute last-minute shopper, next Friday we'll have10 more gift ideas to close out the holiday shopping season for 2021.


*Prices may vary since the publishing of this post.

Construction Bond Claims - Part 1

posted on 12.14.2021

Contractors always work to avoid claims situations, but should also be proactive about understanding the process. There are 3 main types of construction bonds: bid bonds, payment bonds, and performance bonds. Contractors should be familiar with the claims that can arise from each. This week, we take a look at Bid Bonds.


First, what is a bid bond? A bid bond is issued as part of a supply bidding process by the contractor to the project owner, to provide guarantee, that the winning bidder will undertake the contract under the terms at which they bid. 

The cash deposit is subject to full or partial forfeiture if the winning contractor fails to either execute the contract or provide the required performance and/or payment bonds. The bid bond assures and guarantees that should the bidder be successful, the bidder will execute the contract and provide the required surety bonds.

A bid bond claim arises when the contractor, also known as the "supplier" or "principal," is the successful bidder but fails to enter into the contract and provide final bonds.

Generally, the principal and surety are bound to pay a stated sum (for example, 5-10% of the contract price) to the owner (or general contractor), also known as the"obligee". The principal and surety should make sure the bond form caps liability at a defined amout --- typically the difference between the principal's bid and the bid of the next highest bidder, not to exceed the penal sum of the bid bond.

Contractors prefer the use of bid bonds because they are a less expensive option and they do not tie up cash or bank credit lines during the bidding process. Owners and general contractors also use bid bonds because they establish and confirm that the bidding contractor or supplier is qualified to undertake the project.


Leveraging one's relationship with the right surety gives a contractor the knowledge and experience of their claims team. Knowing the basics is the first step for any contractor who wants to take on bonded jobs.

Odds and Ends

10 *MORE* Gift Ideas for the Construction Worker

posted on 12.10.2021

We are now 16 days away from Christmas; how are you doing on that holiday shopping gift list?

If you're still searching for something the construction worker in your life will absolutely love, whether they're out on the site full-time or working behind a desk, we have 10 **more** gift ideas to explore right here.


1.) Driving Polarized Sunglasses (Amazon Fashion, $17)

2.) Construction Site: Merry and Bright - A Christmas Lift-the-Flap book (Chronicle Books, $13)

3.) Funny Travel Beverage Tumbler: "I Turn Coffee Into Houses" (Amazon, $22)

4.) 5-in-1 Tool Pen (Uncommon Goods, $25)

5.) RAK Magnetic Wristband (Amazon, $14)

6.) 3M WorkTunes AM/FM Hearing Protector (Amazon, $57)

7.) Black + Decker My First Tool Box (Target, $10)

8.) Awesome Engineering Activities for Kids: 50+ Exciting STEAM Projects to Design and Build (Amazon, starting at $7)

9.) Rite in the Rain Soft Cover Waterproof Worksite Notebook (Rite in the Rain, $6.50/each)

10.) Dr. Prepare Heated Vest - Unisex (Amazon, $57)


Check back next Friday for 10 more gift ideas as we grow ever closer to December 25!


*Prices may vary since the publishing of this post.

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