Maintenance bonds protect the project owner from any problems and defects that may arise from the project. This ensures that the contractor or construction company remedies any issues before the project has been deemed, completed.
Maintenance bonds cover things like design defects, workmanship faults, and any other issues that may arise from work.
Unlike LICENSE BONDS, maintenance bonds are only valid for a set time. Typically, maintenance bonds are set in terms of 12, 18, or 24 months. Claims on the bond can only be submitted during the time period the bond is valid.
Who Needs a Maintenance Bond?
State and federal projects require maintenance bonds on most projects. It will be stated in the contract if the project manager requires their construction company to secure maintenance bonds. It is, however, typically required for most government projects. This is to ensure taxpayer money that is funding the project will be secure. Government projects may have longer terms than private bonds.
Maintenance bonds are not required by law. It is up to the project manager to determine if they are going to require a maintenance bond for their construction company. Construction companies may seek to procure a maintenance bond and a performance bond. They are similar but cover different aspects of the project.
The maintenance bond may cover the machinery and equipment used during the project, while the performance bond guarantees the completion of the project.
Applying For a Maintenance Bond
Determine with the project manager if a maintenance bond is required for your project. The cost of a maintenance bond will vary depending on the size of the project and the terms outlined in the contract. As with all bonds, the quality of the credit score will reflect the rate of the bond.