Why Construction Surety Bonds Are Important As A Way Of Construction Risk Management
Construction companies and property owners need to find various ways of managing risks that may befall their clients and workers. Companies and individuals should be advised on the need to assess all possibilities of risk occurrences and develop methods of managing them.
Multiple cases of contractors and clients defaulting contracts have prompted the need to have construction surety bonds alongside the contracts. To ensure that both the construction company and the client stick to their contracted obligations in a construction project surety bonds like bid bonds, payment bonds and performance bonds have to be used.
Payment surety bonds put the contractor under the obligation of paying the workers, subcontractors and even the company supplies the materials to the construction site. The clients of construction companies are protected by the surety bonds from any losses that may result from the failure by the contractors to conduct the job in accordance with contract terms.
The bonds are also important during the times when various contractors bid for the construction jobs since they provide the chance for only the best and most qualified bidders to be given the contract. It also protects the contractors by ensuring that the contractors and their workers get paid accordingly as stated in the contract.
Construction projects can only be effectively completed if risk management is done to identifying the risk and cancelling its effects before it occurs. It also ensures that all the available resources for construction are used effectively without any possible wastage that would cause financial dent to the budget that was already set aside for the construction project.
Construction jobs should be done systematically and with a lot of care to avoid exposing clients to various risks like injuries and even death. In order to manage risks, companies and individuals that intend to hire the construction services should first hire risk consultants to give provide them with a professional assessments of all possible risks the construction may bring.
Construction companies should rely on the explanation and control measures given by the risk consultants before embarking on the construction projects for their clients.Risk consultants also enable their clients to keep their contractors accountable for every construction material bought since they conduct an audit on the expenses the property owner incurs in addition to whether these materials were put into proper use.
Most insurance companies prefer doing business with construction companies that incorporate risk management into their activities even as they serve their clients.
In addition, the insurance company is likely to offer insurance to the construction company at low premiums since there are low probabilities that risks insured against will occur.
With the help of a construction surety bond, a client can prequalify or disqualify a contractor, based on the contractor’s experience in the construction business.