An annual surety fee can range anywhere from $1,500 to $3,000 and is typically billed each January 1st. This fee covers the cost of the surety companies underwriting but it also covers the cost of any bid bonds, surety’s consents or prequalification letters you require. In essence, once you’ve established your facility and paid the annual surety fee you can get as many bid bonds, surety’s consents and prequalification letters without any additional cost in the following year.
Once you have established a surety facility the process to obtain these bonds is very easy. When you identify a project that you would like to bid that has a requirement for a bid bond, you would prepare what is called a bond requisition form. This form provides some basic details on the project you are looking at bidding. This would include who the project owner is, your estimated tender price, closing date of the tender and estimated project duration. You would then submit this bond to your surety broker and they would prepare your bonds and have them ready well ahead of the tender close.
It is important to note that once you have a facility, the individual jobs do not require approval from the surety. Providing the bond requisition is purely a way for the surety broker to get the basic information they require to complete your bid bond.
If there is a project you are interested in that is larger than your facility limits, your broker should be helping you build the business case around that project so that you can secure approval from your surety company.
A surety company will look at a variety of items when establishing a surety facility and providing bid bonds. They look at the capital of the business, character of the owners, and capacity of the company to execute the work.
Capital refers to items like the financial strength of the business, personal net worth of the owners and ability to cash flow the work the business intends to undertake.
Character relates to an owner’s past history of completed projects, their ability to provide timely and accurate reporting and strength of their references.
Capacity refers to a company’s ability to execute the work it intends to bid. This includes what accounting systems the business has, what project management expertise and tools they use and whether they have the required equipment.
This process can look complicated but it doesn’t have to be. Having an experienced surety broker that understands this process and has the right markets will ensure that establishing a surety facility is an easy and transparent process. Please reach out to FCA to discuss how we can best help your firm establish a surety bond facility.
When you establish your surety facility with your broker you will be provided a single job limit and an aggregate limit. An aggregate limit is the total cost to complete of all of your outstanding work at any given point in time. You will also be provided with your surety bond rates for any performance and labor and material payment bonds you require and will also be charged an annual surety fee.
Bonding Facility Example:
Single Contract Limit: $1,000,000
Aggregate Contract Limit: $5,000,000
It is important to note that these limits are guidelines but are never set in stone as contractors require flexibility with their limits to ensure they can properly service their clients and grow their business.
As a long-standing surety brokerage we have excellent working relationships with all of the surety companies currently operating in Canada. Our key partners include:
We know these companies well and understand their underwriting philosophies and principles. This is very important as no two sureties are alike. By understanding the appetites of each company, we are able to place our clients with the right surety partner. This ensures not only excellent terms but also a long-standing relationship that supports the growth and flexibility that our contactors demand.
Our organization has been working with FCA Surety Bonds and Insurance for over 2 years. The team, led by Jamie Collum and Warren Griffiths, exceeds expectation in service, responsiveness and construction knowledge. Our business needs often demand last minute bonding, and we have never been disappointed by FCA. Always going above and beyond to deliver the right solution in a seamless and effortless manner. We highly recommend FCA for all construction insurance needs.
After 6 years in business, our construction company was asked to provide bonding for 3 very important projects that were awarded to us. We had no idea where to start as bonding was something totally unknow to our organization. A quick search online, and let me say, we couldn’t have found a better company to assist us…. FCA! Andrew and his team were quick to explain the intricacies of bonding, all the requirements including processes. They took their time to clearly explain and educate us on all that is bonding. They were patient and they took the time to walk us through the necessary steps to get us started and set up. These days, it is rare to recieve this level of support. I highly recommend FCA!
FCA is one of the best companies we have had the pleasure of working with so far. Very professional, fast and always on time. Looking forward to continue working with them.