Renewable energy sources have been the spotlight for several years now and it seems that the movement is only growing in popularity. The city of Sacramento is hoping to take advantage of a new Senate Bill 555 that was passed in January to help encourage more commercial property owners to go green.  The city is working on making financing options available to the property owners interested in getting renewable energy sources on their property.
This is important to for bond companies to be aware of it because often performance and payment bonds are required on these types of projects to guarantee that the work is done correctly and on schedule.  With financing options available, hopefully more people will be able to enter into the program to get their buildings equipped to operate on renewable energy. One important aspect is that the program will want to have contractors that are experience with solar panels to performing the projects.  This is why many contractors are contacting the CES program because they would like to be able to get a piece of the pie.  For more information, visit the Sacramento Business Journal.

We get many calls asking for bid bond and the majority of contractors have no idea why they are being asked by the owner or GC to get one.  A bid bond is there to guarantee the bid amount and that the contractor will enter into the contract if awarded the project.  The owner can place a claim on the bid bond if the contractor is unable to enter into the contractor, for example if they went into bankruptcy and closed their doors.  The amount of the claim is limited to the percentage of the bid bond amount.  For example, if the bid amount is $100,000 and the bid bond is for 10% then the penal sum of the bond is $10,000.  Generally, the owner or GC make a claim on the bond for the difference between the contractor they were going to give the project to and the next bidder.  So if the low bid at $100,000 could not enter into the contract and the next low bid was $102,000 then the owner or GC could make a claim for the $2,000 difference.
The underwriter process for bid bonds is the same as if you were awarded the project.  Even though the bond amount is only $10,000 the surety needs to underwrite the company assuming they will win the project and issue performance and payment bonds for $100,000.  So when you apply for a bid bond be prepared to qualify for the entire bid amount and the contract even though you haven’t been awarded the project yet.

The construction industry is a great indicator of how the economy is doing.  If construction is growing then people are feeling confident in the economy and purchasing homes and commercial properties.  The Sacramento Area has been severely affected by the poor economy and many people are wondering when the tide will turn for the capital city.   The city of Roseville is interested in finding a developer to design and build a conference hotel that would be capable of holding meetings as many as 1,000 people and have 250 rooms.  Roseville sees a opportunity for this type of hotel in their area because right now the only hotels available for meetings that large are located in Sacramento.  The city is prepared to provide the land and financing for the proposal that they choose.  Once completed, the city will own the hotel and lease it to the hotel operator.
The city will require a performance and payment bond of the contractor that is constructing the hotel.  These bonds will guarantee that the hotel is built according to the contract plans for the price of the bid proposal.  The price range of the hotel is estimated at $36 million which the city will want to make sure is secured by a performance bond.

A telemarketing bond is a type of commercial bond that guarantees that the company will abide by the industry regulations in the state it is operating.  Surety bond is an umbrella term used to categorize hundred of different kinds of bonds.  Surety bonds are then broken into 2 sub-categories: commercial bonds and contract bonds.  Contract bonds include any bond requirement that is being specific in a contract between two parties.  Commercial bonds include all other bonds that do not guarantee a contract.  Since a telemarketing bond is required to guarantee that the telemarketing company is going to follow regulations it is classified as a commercial bond.
The telemarketing bond offers protection in two ways: the bond protects the public from companies that knowing break the law and the bond protects the public from companies that unknowingly break the law.  From the public’s view point, the surety bond is there as protection no matter the reason for the telemarketing company breaking the law.
For companies interesting in getting the bond, the rate is determined by the individual applicant’s credit score, financial statements, and bond amount.  In recent years there has also been evidence that the riskiest type of telemarketing bond is in Florida for selling timeshares.  Companies applying for this specific bond are likely to get a higher quote than some applying for a telemarketing bond in Ohio to sell cellular phone plans.

A committee in the House of Representative is working to make it easier for small business to work with the Department of Defense (DoD).  This is good news for small contractors that are interested in doing federal project but are unable to cut through the red tape to get the jobs.   One issue brought up to the DoD is that many of their contracts are too large for small contractors to get a performance bond. For the DoD a $2 million project is classified as “small” however many small contractors would struggle to get a $2 million bond which knocks many of them out of the running leaving only the large companies with the bonding capacity to get those jobs.
Some people feel the DoD is concern about the additional risk of hiring small to medium size contractors because they are more likely to fail on a job then a large well-known contractor.  The culture at the DoD is very risk adverse so part of the changes are going to include making it known that failures will happen but the surety bonds are in place to prevent it from being detrimental to their progress.  The purpose of the performance bond is to guarantee that the project is going to get completed and it is the surety underwriter’s job to qualify the contractor prior to giving them the bond.  For more information on this topic check out http://www.federalnewsradio.com/?nid=394&sid=2837435 .

The case Tverberg vs. Fillner Construction has been going for six years and many people are hoping it will reach a conclusion this year.  Fillner Construction was hired as a general contractor to expand a fuel facility in Dixon, CA.  As with many larger projects, there were several layers of subcontractors on the project.  Tverberg was an independent contractor hired by a subcontractor under Fillner to manage a crew working on the project.  Another subcontractor was drilling some holes for work that as not being managed by Tverberg.  Tverberg asked Fillner to cover the holes for safety reasons, when Fillner didn’t he fell into one and suffered injuries.  The courts have been going through several appeals on who gets the blame.  Should it be the subcontract who hired Tverberg? Or the GC Fillner? Or even the owner of the property?  Due to the many appeals, the decision has been clouded over the past six years.  The most recent ruling in 2010 is that Tverberg was aware of the hole and accepted responsibility for falling in one of them so Fillner could not be indirectly liable since the risk was inherent with the work being done.  This means that Tverberg has experience around construction sites and accepted the risks with the project when he signed the contract to be an independent contractor on the project, therefore he cannot claim to be unaware of the dangers of working on a construction site.
While this case is not officially settled, it should be a reminder to all project owners, GCs and subcontractors that it is important to pass the responsibility for safety compliance down the chain of contractors.  That way everyone on the project is accountable for being aware of the safety requirements and cannot claim to be unaware of hazards on a construction site.

We have seen the homes sales in the bay area gaining momentum and homes are often turning into bidding wars for who will willing to offer the highest price.  The Sacramento Business Journal reports that the region’s new home sales were the higher last quarter then they have been in three years.  This is a good indicator for the economy, if home sales are increasing then it means people are becoming more confident and are willing to spend money in the Sacramento area.  The average prices of homes are up 3% during the quarter.  The low interest rates are also helping to get people to buy homes now because it is often cheaper than renting, if you can qualify for the loan.
The surety bond industry often follows the housing market because they use it as an indicator for construction which is a large diver of surety bonds.  Many contractors are realizing that in order to continue getting work more general contractors and owners are expecting them to procure performance and payment bonds.   Also, building new homes will often require a subdivision bond to guarantee that the streets, sewers and other public improvements are made and maintained until it is turned over to the city.  If you have any questions about these types of bonds, don’t hesitate to email us at info@surety1.com.

There is a pilot academy in Utah that is being charged with accepting tuition from students then not offering the classes or returning the money to the prospective students.  This is a situation that could be remedied if Utah had required the aviation school to be bonded.  The bond guarantees that the school will put on the advertised classes and if they are unable to do they will return the tuition.  This type of surety bond is available to prevent situations such as this from occurring.  In this case in Utah the company was advertising that they were going to hold the money in a safe account and that the company was bonded.  The students eventually discovered that the company did not have a surety bond in place which is why they are taking the owners of the school directly to court.
There are many types of schools that can be required to be bonded: driving schools, cooking schools, flight schools, and most trade schools.  It important for the students to research the company and ensure they are ethical prior to paying for classes.  Some of the people in the case outlined above have lost as much as $50,000 on flight classes that were never offered.

Surety1 is able to call you with a quote on appraisal management company bonds within 24 hours.  The amount of the bond varies depending on the state that the company is operating in.  For our standard markets which require the owners of the company to have credit scores over 650 the rate is 1% of the bond amount.  For a $20,000 bond at 1% premium the costs would be $200.  The states and bond requirements are below:
1. Arkansas requires a $20,000 bond.
2. Arizona requires a $20,000 bond.
3. Georgia requires a $20,000 bond.
4. Kentucky requires a $500,000 bond.
5. Missouri requires a $20,000 bond.
6. Nebraska requires a $25,000 bond.
7. New Mexico requires a $10,000 bond.
8. Oregon requires a $25,000 bond.
9. Tennessee requires a $20,000 bond.
10. Washington requires a $25,000 bond.
Bond requirements are constantly changing so if you need an appraisal management company surety bond that is not listed above we can still get your bond quotes and issued.  These types of bonds are required to guarantee that the company is going to follow the applicable rules and regulations of the real estate industry and the bond is there in case there are claims against the company’s operating practices.

A client of ours recently told me that he went to a job walk in Santa Barbara and there were a total of 116 general contractors there.  So far that is the most I have heard of, and unfortunately its becoming a common story from many of our other clients.  It’s not assumed that whoever get the project made the biggest mistake!  This is not something that owners want to hear.  Even though the bond is in place, the government would prefer the project get done without any issues at a reasonable market price.  There is some relief coming from the state though, they have hired police officers to state investigating violations on construction sites.  They want to level the playing field by making sure that all laborers are being paid the correct wages and companies are properly licensed.
For companies that are already following the rules this is good news.  It will decrease the number of companies bidding projects low because they intend on paying workers in cash and not paying overtime.  The investigative team is working with the California State Contractors Board to help make it a team effort that if a contractor is under suspicion that they license to operate in CA if suspended.  Even thought times are tough and everyone is looking to save money, cheating in the construction industry is no longer going to be ignored and for the more grievous violations there will be misdemeanors or felony files charged.