Requirements for Construction Bonding

Bonding Requirements: The standards under this section apply to construction contracts that exceed $50,000. There are no bonding requirements for small purchases or for competitive proposals. LMHA may require bonds in these latter circumstances when deemed appropriate; however, non-construction contracts should generally not require bid bonds.

Bid Guarantee: For construction contracts exceeding $50,000, offerors shall be required to submit a bid guarantee equivalent to 5% of the bid price (via certified check, bank draft, U.S. Government bond, Bid bond). HUD states: "The bid bond ensures that the bidder will execute the contractual documents that are required within the time specified in the solicitation, or forfeit all or part of the guarantee. A certified check, bank draft, U.S. Government Bonds at par value, bid bond secured by an acceptable surety company, or other negotiable instrument may be accepted as a bid guarantee".

The HUD Handbook No. 7460.8 Rev 2 states that if a bid bond or guarantee is not submitted with the bid, the PHA should reject the bid as non-responsive.

Assurance of Completion: For construction contracts exceeding $50,000, the successful bidder shall furnish an Assurance of Completion prior to execution of the contract. This assurance may be any one of the following:

• A payment and performance bond in the penal sum of 100% of the contract price;
• A 20% cash escrow of the contract price; or
• A 25% irrevocable letter of credit for the contract price.

These bonds must be obtained from guarantee or surety companies acceptable to the State of Ohio, and the U.S. Government and authorized to do business in the State of Ohio.

Procurement will verify that the required bonds are in place prior to issuing a Notice to Proceed. At this time, Procurement is giving the original bond to Accounting for placement in the safe.

Bonding and contract requirements shall be in accordance with 24 CRF 905.316.