Q: Describe types of Bonds.

(Max one page)

A: Some commonly used bonds are:
- Bid Bond
- Payment Bond
- Performance Bond

Bond Type Purpose

Bid Ensures the low bidder will accept the contract if offered and will submit the
required payment and performance bonds.
Payment Guarantees the contractor will pay the subcontractors and suppliers.
Performanc Guarantees the contractor will complete the work in accordance with the plans
e and specifications.

Bid Bond have two purposes:

1. Guarantee the contractor will enter into a contract, if selected as a lowest bidder
2. Guarantee the contractor will provide the required payment and performance bond and
insurance policies.

When the performance bond is submitted the contractor is released from bid bond obligations.

Payment Bond guarantees the contractor will pay the subcontractors and suppliers.

Performance Bonds:
They guarantee the performance of contractor according to contract schedule, commitments,
specifications, quality of work and other terms and conditions. The surety is in a position of being
asked to guarantee the contractor’s performance. Therefore, the contractor must demonstrate an
ability to perform so that surety may issue payment and performance bond to the contractor.

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