Question About Being Bonded

Discussion in 'Landscape Architecture and Design' started by turfmike, Jul 5, 2008.

  1. turfmike

    turfmike LawnSite Member
    Messages: 12

    I'm looking to pick up this small sudivison account and they said I needed to be bonded. I know that it protects the H.O.A from anything coming back on them. My ? is, are any of you guys bonded and if so how much is it costing you to be. Any input would be a great help on this matter. Thanks
  2. cgll1135

    cgll1135 LawnSite Member
    Messages: 89

    Being bonded means you can be trusted. I checked with my insurance company and they told me it would be about $100/yr. It is not the same as liability insurance. Being bond means they do back ground checks on you.
  3. White Gardens

    White Gardens LawnSite Fanatic
    Messages: 6,776

    I would think that having liability insurance should be enough. Just make sure you're covered to the amount that they request. My policy covers me up to a million dollars and I haven't had any problems showing this to my customers.
  4. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Messages: 4,891

    Not even close......You may be thinking of something else but not a bond.

    It is quite the process to become bonded and its not cheap at all.

    Being bonded allows you to post a bond in the amount of your contract.

    It is meant to protect the customer should you not be able to fulfill the terms of your contract.

    Generally not something you would see used in a service business, but its very popular in construction.

    What the bond will do is pay your customer the amount of the contract should you default on your end.

    It protects their progress payments as well.

    If you get halfway through a 100,000 job and you have recieved 50,000 and then you bail on the job. The customers attorney will pursue your 100,000 bond to recover the money that they paid you so that they can pay the new contractor to complete the job.

    Liability insurance protects from damage.

    Bonds protect performance.

    They are not cheap to get...and not easy to get.

    Once you are bonded once though, subsequent bonds are much easier. Eventually a simple phone call will get you the bond.

    Make sure you check the pricing and get a pre-approval for the bond BEFORE YOU PLACE YOUR BID. You will need to include that cost in your pricing.

    I had always thought it was simple and just like adding more insurance and wouldnt cost much.

    I made the mistake of thinking that and bidding on a municipal job. I got awarded the job. I ended up having to pull out of the job when I found out that the bond for the job was going to cost me $20,000.
  5. PROCUT1

    PROCUT1 LawnSite Platinum Member
    from TN
    Messages: 4,891

    The bonding company will do a tremendous amount of research on your company as well. They do price it like insurance.

    Companies who are more experienced in that line of work will pay less for the bond. Because afterall the bond guarentees the customer that you can do the job.

    My first bond that I tried to get was going to cost $20,000 and that was only for a $200,000 job. So you can imagine, not having that figured in the initial cost, there was no way I could take the job with that added money.

    The reason for the huge cost of the bond was that I had never done that particular work on a large scale before. So there was much more risk on the part of the bonding company. The first 3 bonding companies flat out denied me.

    Other companies that were more experienced, and previously bonded, could have gotten that bond for probably $2,000.

    Many times you will see the lowest bidder have to pull out of municipal work and most times its because they cannot get or cannot afford the bond.

    I will say if they are looking for you to be bonded on a mowing contract, that is serious overkill and they are spending a ton more money than they need to.

    The worst thing that can happen on mowing is you fail and the grass gets tall till they hire someone else. Hardly a reason for the price of a bond.
  6. old oak lawn

    old oak lawn LawnSite Senior Member
    Messages: 703

    procut1 is correct. some hoa can be a pain in the ass. we do 1 that has a property management run it for them. they require commercial ins and workers comp but also require commercial auto [witch i had] and they can never pay on time, after they signed a contract with a due date on it. if they want you to be bonded i would look for work somewhere else.
  7. JimmyStew

    JimmyStew LawnSite Senior Member
    Messages: 367

    I agree, for maintenance work/mowing, there is no reason for you to be bonded. If you don't live up to your end of the contract, they can fire you and get someone else to take over. They don't lose out on anything except a weeks worth of mowing or maintenance and maybe having to pay the new contractor a higher rate. I have turned down two accounts because they wanted me to be bonded.

    It's bothers me that these companies expect you to "bid" work so they can get the absolute lowest price and then they expect lots of "extras" like getting bonded and having the right to pay their bill 30, 45, 60 days past due with no conscequenses.
  8. coolluv

    coolluv LawnSite Platinum Member
    from Atlanta
    Messages: 4,509

    Not sure why a maintenance contract would require a bond. Typically a performance bond is required to ensure that the job is completed according to the specs of the job, and to ensure the job gets completed. Also getting bonded is based on your assets as a company. A bonding company will not give a business that has 100,000 in assets a 100,000,000 bond. They will only give you a bond up to what they can collect if you were to go out of business. If you fail to complete the job or get thrown off the job because you are not fulfilling the contract then the bonding company guarantees the work and will hire someone to correct or finish the job.

    That is the way I understand it. I'm not an expert nor do I claim to be.


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