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Performance Bond???

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  • Performance Bond???

    Anyone familar with performance bonds as needed with 2006 AFG awards? Looking for a better explaination of what it entails.

  • #2
    Performance bonds were discussed at length in an earlier thread in this forum. Briefly, and maybe a bit oversimplified, they're a specialty form of insurance. As part of your contract with an apparatus builder, you require them to give you a performance bond. It guarantees that if that builder goes belly up or otherwise fails to deliver you the truck that you ordered, there is money available to have someone else complete the truck.

    The money is available because your builder purchased a bond from a surety company which is usually an insurance company. The surety or bonding company charges the builder n dollars per thousand dollars of the price of the truck.

    The bonding company bases the price they charge the builder on their estimation of the builder's financial strength, among other factors. A builder that is part of a major publicly held corporation that has never defaulted on a contract will get a much better price than a small mom and pop shop that has no track record of how they perform.

    That doesn't necessarily mean that the small builder won't and or can't build you a good truck, it just means that they don't have a lengthy traceable track record and they don't have a gazillion dollars of capital behind them. Some small builders will produce a truly great truck. What it does mean that the small builder may have to pay a higher price for the bond, depending on their track record and how the bonding company rates their financial strength.

    Why does this matter to you? Simply because you get to pay for it. It may be built into the price of the truck, or they may show it as a separate line item and give you the option of declining it. But if the terms of the grant require one, you have to take it and you will pay for it.

    Performance bonds are notoriously hard to collect on.

    Hope this helps you out. Bonds came up in another thread on some other subject altogether. NPFD801, anything you'd like to add?

    Stay safe out there, everyone goes home!

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    • #3
      Performance bonds

      Just an added note: I went back and looked. Performance bonds were on page 2 and 3 of "Lincoln, Nebraska and E1."

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      • #4
        Thanks for your help.

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