How Construction Bonding Works in the City of Abilene

The city of Abilene Department of Building Inspections mandates the purchase of a contractor’s bond for several different contractor categories. The bond requires that all contractors must follow regulations that are laid out in Chapter 8 of the Abilene Municipal Code.

The purpose of these bonds is to ensure that contractors comply with all regulations and codes at the local and state levels. Additionally, This protects the public and the city from damages caused by contractors who don’t abide by these laws. In turn, contractors become financially responsible for ensuring that they follow all relevant codes. They also are required to stay current with tax payments and meet any other obligations detailed in the bond contract.

Construction Bond Requirements in Abilene

Abilene requires building, roofing, demolition, and building moving contractors to purchase a $25,000 surety bond. For swimming pool contractors, the required amount is $10,000. And sign contractors are required to purchase a $3,000 bond. Finally, irrigation contractors have the option to purchase a $5,000 surety bond or have a minimum of $300,000 in general liability insurance.

What Is a Contractor’s License Bond?

Contractor license bonds are an agreement between three parties:

• The principal is the contractor or construction company buying the bond
• The obligee is the city of Abilene, the beneficiary of the bond
• The surety or insurance company is the one guaranteeing the bond and making payments in the event of a valid claim

A contractor’s license bond is a type of surety bond. These bonds create more trust between all parties and increase the chances that the principal will uphold the contract due to the imposition of financial responsibility.

What Types of Construction Bonds Are There?

There are many types of license bonds available to contractors in Abilene.

The highest amount is $25,000, which is required for building, roofing, demolition, and building moving contractors. These types of activities involve more code and regulations, which means there is a higher risk of damage.

For swimming pool contractors, the required amount is $10,000. They are also required to have $300,000 in general liability insurance in addition to being registered as swimming pool contractors with the city. This bond protects the public from damages that may result from swimming pool contractors who fail to abide by local code. These bonds are good for a year.

Sign contractors are required to purchase a $3,000 bond which is also valid for one year. This applies to any contractors who are constructing, erecting, or repairing signs and billboards within the confines of Abilene. The bond obligates contractors to follow all relevant rules and insures any damages that are incurred by failing to follow these rules.

Finally, irrigation contractors have the option to purchase a $5,000 surety bond or have a minimum of $300,000 in general liability insurance. Clearly, these types of projects can lead to significant damage and costs for the public if done improperly. Therefore, the city of Abilene requires that all irrigation contractors abide by Chapter 8 of the Municipal Code.

What Is the Purpose of a Construction Bond?

The purpose of bonding for construction is to provide a guarantee to the city that the contractor will complete the project as agreed upon and abide by all rules and regulations. However, it goes beyond just words or a signature and imposes a financial obligation on the contractor to increase compliance.

Requiring construction contractors to purchase surety bonds allows the city to transfer the risk of the project not being completed on time or the contractor making an error to a third party. By attaining a construction bond, the contractor can also signal that they are motivated to complete the project as agreed.

What Are the Benefits of Construction Bonds?

The most obvious benefit for the owner of a construction bond — whether a bid bond, performance completion bond or construction retention bond — is the assurance of project completion, which protects the owner if the contractor defaults on the contract.

There are some additional benefits as well. It signals to clients that the contractor’s financial standing has been evaluated by an objective third-party. It gives them confidence when awarding projects to know that the risk of something going wrong due to a contractor error is minimized. It also allows clients greater visibility and predictability when managing budgets or projecting cash flows.