What is a surety bond?

A surety bond ensures that a contractor fulfills certain terms and conditions of a contract.

 

What are the most common types of surety bonds?

Bid:

Guarantees that the bidder (e.g. construction contractor) will actually enter into the contract at the submitted price during the RFx process. Additionally, the bid bond sets the requirements for performance and payment bonds as necessary. Bid bonds are drafted during the RFx process.

Performance (also may be called Contract Bonds):

Protects the owner (e.g. University) from financial loss caused by the contractor who fails to deliver goods or services in accordance with the terms, specifications, and conditions of the contract

Payment (also may be called Contract Bonds):

Protects certain providers of material and labor to a job (e.g. subcontractor). It guarantees that the contractor will pay bills in accordance with the contract terms

 

When are surety bonds needed?

Surety bonds may be required based on the terms of a given solicitation – especially when the non- performance of contract terms would have adverse financial effects on the Entity or the University – or when subcontractors play a key role in the successful outcome of a contract.

Bid, Performance and Payment bonds are required for certain state construction contracts as described by various Tennessee statutes. Please refer to the following links for additional information:

 

Bid bonds

Tenn. Code Ann. §62-6-129 (bid bonds for construction manager services)

 

Performance bonds

Tenn. Code Ann. §4-15-102

 

Payment bonds

Tenn. Code Ann. §4-15-102

Tenn. Code Ann. §12-4-201 through §12-4-208

 

 

What is a fidelity bond?

A fidelity bond provides financial reimbursement to the University of Tennessee for the wrongful taking of UT-owned property by a third-party contractor’s employee(s).

When are fidelity bonds needed? 

Typically, fidelity bonds are required when third-party contractors have their employees engaged in work under a state or University contract with limited state or University supervision present and have easy access to University property and/or monies. Examples: vendors who provide after hour janitorial services, security services, or concessionaire contracts.