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. <br />r <br />Page: 25 <br />Performance and Payment Bonding Requirements (Non-Construction Contracts) <br />The Contractor may be required to obtain performance and payment bonds when necessary to <br />protect the Recipient's interest. If the Recipient requires such bonding after execution of the <br />Contract, then Recipient will pay the reasonable cost of the bond premium. <br />(a) The following situations may wanant a performance bond: <br />1. Recipient property or funds are to be provided to the Contractor for use in performing the <br />contract or as partial compensation (as in retention of salvaged material). <br />2. A contractor sells assets to or merges with another concern, and the Recipient, after <br />recognizing the latter concern as the successor in interest, desires assurance that it is financially <br />capable. <br />3. Substantial progress payments are made before delivery of end items starts. <br />4. Contracts are for dismantling, demolition, or removal of improvements. <br />(b) When it is determined that a performance bond is required, the Contractor shall be required to <br />obtain performance bonds as follows: <br />1. The penal amount of performance bonds shall be 100 percent of the original contract pnce, <br />unless the Recipient determines that a lesser amount would be adequate for the protection of the <br />Recipient. <br />2. The Recipient may require additional performance bond protection when a contract price is <br />increased. The increase in protection shall generally equal 100 percent of the increase in contract <br />price. The Recipient may secure additional protection by directing the Contractor to increase the <br />penal amount of the existing bond or to obtain an additional bond. <br />(c) A payment bond is required only when a performance bond is required, and if the use of <br />payrnent bond is in the Recipient's interest. <br />(d) When it is determined that a payment bond is required, the Contractor shall be required to <br />obtain payment bonds as follows: <br />1. The penal amount of payment bonds shall equal: <br />(i) Fifty percent of the contract price if the contract price is not more than $1 million; <br />(ii) Forty percent of the conh~act price if the contract price is more than $1 million but not more <br />than $5 million; or <br />(iii) Two and one half million if the contract price is increased. <br />