Non-Construction Performance Bonds with Merchants
October 4, 2021
Roadside mowers, janitorial services, and landscape maintenance are just a few of the Non-Construction Performance (NCP) bonds that Merchants Bonding Company will now write through our Commercial Department. NCP bonds will earn commercial commission rates and can be issued on the Merchants Bonding Company Hub™, our secure and efficient online bond portal.
WHAT ARE NON-CONSTRUCTION PERFORMANCE BONDS?
NCP surety bonds guarantee “non-sticks-and-bricks contracts.” This includes any contract that does not relate to a building or construction job. NCP bonds include: Service contracts; Supply contracts; Supply & Install and/or Fabricate & Supply.
Service and supply businesses must have an NCP bond if the contract is a certain size and uses public money. The federal Miller Act and the “Little Miller Acts,” at state and local levels, require surety bonds. NCP bonds are also required by many business contracts between two private parties.
NCP – SERVICE CONTRACT BONDS
As outlined in the contract document, service contract bonds guarantee the principal will perform a specific service, at a set price, for an agreed upon time period.
There are two ways to write the contract:
- The contractor receives a fixed amount for the entire term of the contracted service.
- The contractor receives payment each time the service is performed over a set period of time.
If the contractor fails to perform the service, the surety must replace the contractor or reimburse the customer or “obligee” for losses.
NCP – SUPPLY; FABRICATE & SUPPLY; SUPPLY & INSTALL CONTRACT BONDS
These bonds guarantee the delivery of material, equipment or other supplies as outlined in the contract. Supply bonds give financial protection to the purchaser of the materials. If the supplier fails to deliver the goods within the time and quality constraints of the contract, the surety pays for the cost of the missing materials.
Merchants’ commercial underwriters will focus on bond limits up to $1 million single / $3 million aggregate. Contract terms up to three years are billed up front. Longer term contracts will need annual bonds.