A tender calls for a bid bond. The owner wants a performance bond before signing the contract. For contractors, these requirements often come with tight deadlines. Yet a surety does not look at a contract in isolation: it first wants to understand the business making the commitment — its finances, its experience and its ability to see the project through.
A complete, well-organized file can make the review easier and help avoid last-minute back-and-forth. It does not guarantee the outcome, but it lets you present an accurate picture of your company. Here are the main things to prepare.
The main construction bonds
Depending on available programs, three types of bonds are commonly required in connection with a bid or a construction contract:
- Bid bond — supports a contractor’s commitment in connection with a bid, subject to the terms of the bond.
- Performance bond — guarantees certain contractual obligations of the contractor in accordance with the terms of the bond.
- Labour and material payment bond — addresses certain payment obligations to eligible beneficiaries in accordance with the terms of the bond.
Tender documents usually specify which bonds are required, the amount or how it is determined, and the form to be used. Reading them carefully from the outset tells you exactly what to request — and by when.
1. Your financial statements
Your company’s financial position is at the heart of the assessment. Gather your most recent financial statements and, if you are well into your fiscal year, interim statements as well. The review may look at working capital, liquidity, equity, debt and profitability, among other things.
The level of detail expected may vary depending on the program and the size of the commitments involved. If in doubt, it is better to ask early than to discover a missing document the day before the tender closes.
2. Your experience and project history
A list of completed projects helps show what your company can deliver. For each project, you might include:
- the type of work performed;
- the approximate contract value;
- the type of owner;
- when the work was carried out;
- your company’s role (general contractor, subcontractor, etc.).
Describe the experience of your management and key people too. This is especially useful for a younger company whose project history is still limited.
3. Work in progress and backlog
A surety wants to know whether the new contract fits reasonably alongside the work you already have. A work-in-progress schedule — the value of each contract, its stage of completion, the amounts billed and the work remaining — together with an overview of your backlog helps assess your company’s organizational and financial capacity.
4. Details of the project
The contract itself is part of the assessment. Have the following ready:
- the tender documents or the proposed contract;
- the estimated amount of your bid or of the contract;
- the planned construction schedule;
- the owner’s bonding requirements;
- the key contract terms, such as penalties, holdbacks or required warranties.
5. Corporate information
Your corporate structure, the list of owners and officers, bank statements and information on debts and other existing commitments round out the picture. Depending on the program, additional documents or financial projections may also be requested.
Think capacity, not just one contract
Beyond a specific project, it can be worth discussing your future surety needs: the kinds of projects you are targeting, the contract sizes you have in mind, the growth you expect. Avila’s objective is to develop a relationship that allows your surety capacity to evolve alongside your business. A company that keeps its financial information current and documents its projects over time will be better prepared for its next requests.
What happens next
Once a request is submitted, Avila assesses the risk based on the type of surety requested. Additional information or documentation may be requested. The file may then be approved, conditionally approved, returned for additional information or declined. Once all conditions have been satisfied, the applicable bond may be issued.
Construction surety is offered subject to available programs and the eligibility of the contractor and the project. All requests remain subject to a complete review.