Suggested Strategies for Reaching an Early Resolution with the Performance Bond Surety of a Defaulting Subcontractor

A very common complaint within the construction industry is the perceived lack of responsiveness of performance bond sureties in connection with requests to timely cure or voluntarily pay for the consequences of subcontractor default. Sureties are perceived to be litigious and non-responsive. The value of a performance bond as security against a subcontractor default is, in turn, perceived to be of somewhat questionable value, particularly with the advent of alternative industry products, most notably Subguard.

There is little doubt that at least a few sureties have earned this negative reputation, and many of us have personal experiences that reinforce the industry perception. And yet, the performance bond product remains an ingrained facet of our industry.

For instance, certain owners are unwilling to approve or pay for Subguard. Other owners and contractors are simply unfamiliar with alternative subcontractor default security products. In addition, alternative performance security products, including Subguard, are perceived to be expensive. For these reasons, and despite the advent of Subguard several years ago, there can be little doubt that performance bonds will remain an aspect of virtually every contractor’s risk management strategy for the foreseeable future.

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