Griddle Oven

On the plus side, since the cost of the bond is included in the contract amount, the city may have saved about $3,000 for the tax payers. That's the approximate difference between the cost of a traditional 100 % performance and payment bond as opposed to this maintenance bond issued for a lower dollar value.

However, this fails to take into consideration the time and expense associated with the pre-qualification process. Who devised the evaluation criteria? Who performs the actual review? Presumably there is an evaluation of prior experience, human and physical resources, financial condition including other contractual obligations, credit status, and the plan for performance of the work. How long does the evaluation of the bidders take and how much does it cost? Is it more than $3,000?

In the absence of a performance bond, what solution is available to the taxpayers if a contractor does fail in the midst of the project? The city would be forced to conduct an evaluation regarding the remaining portion of the work, then re-advertise the project and spend additional time and money to bring in a completion contractor. (Contractors expect to make exceptional profits when performing a rescue.).

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Bear in mind, on a typical bonded project, the underwriters exercise a high level of scrutiny over who they support. Bonding companies are risk averse. This means highly trained professionals evaluate each contractor's capabilities and only provide the bonding support when they have passed all the tests. Underwriters do this for a living. For them, it's not a sideline.

Our conclusion is that this alternative strategy places an unnecessary risk on the tax payers. Let's face it, bonds are an economical way to screen the contractors, assure successful performance and guarantee bills are paid. The 100 % P&P bond requirement is normally statutory because it is the most efficient way to protect the public interest.

If these two basic questions have been answered favorably, there are some important things about the business that require attention and putting together.