Requiring Surety Bonds from Subcontractors Make Sense for Mississippi General Contractors

General contractors shoulder a huge responsibility. Not only do they need to ensure a project gets completed on time and under budget, but they must also choose the right subcontractors. Finding qualified specialty trade contractors and other skilled labor adds more complexity to a project. Another issue general contractors face is whether or not they should require surety bonds from their subcontractors. Taking the hit from a defaulted subcontractor is the last thing many want to face. If they fail and the project gets behind schedule, clients become upset, and the general contractor’s reputation is on the line.

Insights into Requiring a Surety Bond from a Subcontractor

An article in Surety Bond Quarterly lends some insight on best practices for determining if you should require a security bond from your subs:

• Develop a Strong Prequalification Process: It’s imperative that subcontractors have the necessary skills and sound financial backing. Well-established subcontractors pose the least amount of risk compared to less established ones. In both cases, having a surety bond makes sense. Additionally, it’s wise to develop a rigorous vetting process now to mitigate risk later.
• Require a Surety Bond Instead of a Bondability Letter: Subcontractors often work for several general contractors. They may overcommit themselves or become intertwined in a problem job. The bondability letter offers some assurance that the subcontractor can be bonded; however, it’s not binding for your project. Requiring a surety bond alleviates that issue.
• Bidding Can Get Dicey when Balancing Risk with Profit: There is always a balance between potential risks to a job and making a profit from it. General contractors must weigh if they want to bond all subcontractors or only those critical to keep the project on schedule. Another group to consider includes those that would be harder to replace if they fail to perform. All these factors should be considered during the bidding process.

Choose the Right Company for Your Surety Bond Needs

Ensure your project is well protected if a subcontractor fails to perform by requiring surety bonds on all your Mississippi projects. The team at Hawsey Insurance specializes in providing bond services, including bid bonds, contractor bonds, fidelity bonds, and much more. We also handle a variety of insurance products to protect all aspects of your contracting business. Look to us for general liability, worker’s compensation, property insurance, and umbrella insurance. We take our relationship with you and your success seriously. When you succeed, we succeed. Call us today!

Hawsey Insurance agents can help you obtain the right surety bonds for your Mississippi projects. Contact us today to schedule an appointment at one of our three locations in Jackson, Madison, or Southaven, MS.