In business, it is important to offer assurances that the work given will be done according to the stipulated requirements and contracts are critical in ensuring that all the involved parties stay true to their word. For those in a construction business, contracts may be required between the obligee, principal and surety. These contracts are called contractor license bonds. In Oregon, contractors purchase Oregon contractor insurance as a way to assure customers they will complete the work contracted. If the principal fails, the surety offers compensation for damages. Then, the principal repays the surety.
A contractor must have experience (four years for level 2 contractors and eight years for level 1). The Oregon Construction Contractors Board (CCB) is the body tasked with regulating Oregon construction license and bond activities. Oregon CCB requires the contractor to have the financial strength to support the project being undertaken. This means that a financial analysis is done to estimate the financial capacity of the contractor.
There are various types of constructor bonds depending on the project to be undertaken. They include:
- A performance bond meant to protect the client by ensuring that the contractor completes the job as per the bond requirements.
- A payment bond seeks to ensure that all employees, suppliers and subcontractors are paid making the project lien free.
- A contractor license bond or permit bond protects all the parties involved in the project. It can be used by any of the party including the issuing firm in claims that involve unprofessional business decisions.
- A supplier bond protects the purchaser in case a supplier neglects his duty. The bond is release to cover damages incurred by the purchaser.
Oregon CCB Bond Requirements
There are requirements stipulated by the Oregon Construction Contractors Board that contractors need to follow. The Oregon CCB bond requirements include:
- Contractors are required to file a bond with the board upon application or renewal of a license. No other bond form is accepted except the CCB bond form. Only the original bond copies are accepted by the CCB. It should be an Oregon contractor bond from the list of companies provided by the CCB.
- The names that the bond is filed under should match the names registered at the Oregon Corporation Division.
- The bond should bear the original signature of the company lawyer and if there is a power of attorney form, it should not be removed.
- All bonds are continuous. Bonds may be cancelled by giving a 30 day notice to the CCB.
- The type of bond applied for depends on the contractors’ endorsement. If the contractor has both residential and commercial endorsement then they are expected to have both a residential bond and a commercial bond.
Failure to follow the Oregon CCB bond requirements may result in a delay in issuing the license. It is illegal to do construction work in Oregon without the necessary license or contractor bond.
Why It’s Important to Be Properly Bonded in Oregon
Contractors need to be properly bonded as a security measure. In case of damages incurred, the principal can claim the bond to the surety and get some credit extended to cover the damages. The principal is still expected to repay the surety. The surety is not obligated to cover the loss hence the responsibility of ensuring no damages occur lies squarely on the contractor.
Contractors who have contractor bonds show good faith, commitment to the project and professionalism to their clients. It portrays a positive image to potential client if purchasing a contractor bond is a requirement when the contractor takes a job.
Examples of What Can Happen if Not Bonded
A contractor may be forced to bear the damages and neglect caused by their employee or partner if not bonded. They may also bear the cost of accidents, faulty works or construction defects. For example, a tool may fall and damage a door that a bonded contractor can claim damages but a non-bonded contractor bears the cost.
Some damages may involve employees or the clients that may end up causing delays in a contractors work or end up having legal consequences. Most projects have a deadline and stipulated budget. Delays will have a negative impact on the deadlines and additional cost may strain the available budget. To stay on the safe side contractors should have contractor bond.
Who Needs to Get Bonded in Construction?
According to the Oregon CCB, bond requirements any individual working in construction for payment whether it’s renovating or real estate should get bonded. Most handymen should be licensed and have the necessary bond. Examples of some of the jobs that should be bonded are flooring, plumbing, heating, air conditioning, concrete, roofing and painting among others. The jobs that do not require bonds include gutter cleaning and debris clean up.
Contractor bonds are without a doubt important and advantageous to contractors. They help build trust in the client and contractor. They are also a requirement in the state of Oregon.
If you have any questions about CCB surety bond costs, Oregon CCB bond requirements or how to get bonded in Oregon, we’re here to help. If you’re ready to get an Oregon contractor bond, or any kind of construction related bond, you’ve found your answer. NFP is the premier contractors bonding and insurance company. Apply online or call our office.