This Week in Passenger Transport
May 12, 2003
Contractors, as well as transit agencies, are struggling with a tight surety bond market that is translating into higher project costs and lower competition for major transit capital projects.
During the past year, some transit agencies have begun loosening their surety bond requirements on infrastructure investments to adjust to this increasingly tough and more expensive market for bonds. Despite these signs of change, contractors and transit agencies continue to grapple with what remains a difficult situation. Some industry leaders believe that more realistic bonding practices will need to be adopted.
Transit agencies typically require surety bonds from contractors involved in construction, vehicle manufacturing, and technology projects. Although agencies can require three types of bonds-to secure a contract's bid price, to cover contractor performance, and to guarantee payments to subcontractors-it is the performance bond that often places the heaviest burden on a contractor. A performance bond, with its price tied to the contract's value, is established to secure that the contractor fulfills its obligations.
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