Oklahoma Construction Bonds

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about Oklahoma construction bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

What Is an Oklahoma Construction Bond?

Construction project owners can lose a lot of money if the contractors they hire fail to comply with all legal and contractual requirements. Oklahoma construction bonds provide protection against such financial losses for the owners of public works or private construction projects. Construction bonds mandate contractor compliance with applicable statutes and contractual specifications. They also obligate contractors to compensate project owners, and in some cases, other injured parties, for monetary losses caused by contractor noncompliance.

What Types of Oklahoma Construction Bonds May Be Needed?

In Oklahoma, there is no statewide licensing of contractors other than certain specialty contractors. Other specialty contractors and general contractors may be subject to local licensing laws. It’s up to the licensing authority (state or local) whether furnishing a contractor license bond is a prerequisite for obtaining a license. 

Oklahoma’s “Little Miller Act,” the state’s version of the federal Miller Act, both performance bonds and payment bonds for projects valued in excess of $50,000, each bond for 100% of the contract value. Private construction projects are not subject to Oklahoma’s Little Miller Act. But, private project owners often choose to require both performance and payment bonds from their contractors. And both public and private project owners can make providing a bid bond a prerequisite when contractors are competing for a construction project.

Other construction bonds that contractors operating in Oklahoma may need to purchase include:

  • Maintenance bonds
  • Contractor license bonds
  • Subdivision/site improvement bonds
  • Supply bonds
  • Solar decommissioning bonds
  • Right of Way bonds

How Does an Oklahoma Construction Bond Work?

There are three parties to a construction bond, referred to in the language of surety bonds as the bond’s:

  • obligee—the project owner requiring the bond,
  • principal—the contractor purchasing the bond, and 
  • surety—the bond’s guarantor.

When a claim is received, the surety will conduct an investigation to determine whether it is valid. The principal is legally obligated to pay valid claims. However, it’s uncommon for a principal to be able to pay a claim on short notice. 

As the bond’s guarantor, the surety has agreed to extend credit to the principal to be used for a claim, if necessary. So, the surety will pay a valid claim initially, and the principal must repay the resulting debt according to the surety’s credit terms. Not being repaid for the credit extended in paying a claim typically results in the surety initiating a lawsuit against the principal to recover the funds.

How Much Does It Cost?

The premium for a construction bond is the product of multiplying the bond amount by the premium rate the surety assigns to the principal through underwriting. The underwriting goal is to set a premium rate commensurate with the risk of the surety not being repaid for a claim paid on the principal’s behalf. That risk is measured by the principal’s personal credit score. 

A high credit score is regarded as reliable evidence of a low risk to the surety and low risk results in a low premium rate. A low credit score means the risk to the surety is higher, which calls for a higher premium rate.

The premium rate for a principal with good credit usually is in the range of 1% to 3%.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about Oklahoma construction bonds. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

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FREE CONSTRUCTION BOND QUOTE

What Is an Oklahoma Construction Bond?

Construction project owners can lose a lot of money if the contractors they hire fail to comply with all legal and contractual requirements. Oklahoma construction bonds provide protection against such financial losses for the owners of public works or private construction projects. Construction bonds mandate contractor compliance with applicable statutes and contractual specifications. They also obligate contractors to compensate project owners, and in some cases, other injured parties, for monetary losses caused by contractor noncompliance.

In Oklahoma, there is no statewide licensing of contractors other than certain specialty contractors. Other specialty contractors and general contractors may be subject to local licensing laws. It’s up to the licensing authority (state or local) whether furnishing a contractor license bond is a prerequisite for obtaining a license. 

Oklahoma’s “Little Miller Act,” the state’s version of the federal Miller Act, both performance bonds and payment bonds for projects valued in excess of $50,000, each bond for 100% of the contract value. Private construction projects are not subject to Oklahoma’s Little Miller Act. But, private project owners often choose to require both performance and payment bonds from their contractors. And both public and private project owners can make providing a bid bond a prerequisite when contractors are competing for a construction project.

Other construction bonds that contractors operating in Oklahoma may need to purchase include:

  • Maintenance bonds
  • Subdivision/site improvement bonds
  • Supply bonds
  • Solar decommissioning bonds
  • Right of Way bonds

There are three parties to a construction bond, referred to in the language of surety bonds as the bond’s:

  • obligee—the project owner requiring the bond,
  • principal—the contractor purchasing the bond, and 
  • surety—the bond’s guarantor.

When a claim is received, the surety will conduct an investigation to determine whether it is valid. The principal is legally obligated to pay valid claims. However, it’s uncommon for a principal to be able to pay a claim on short notice. 

As the bond’s guarantor, the surety has agreed to extend credit to the principal to be used for a claim, if necessary. So, the surety will pay a valid claim initially, and the principal must repay the resulting debt according to the surety’s credit terms. Not being repaid for the credit extended in paying a claim typically results in the surety initiating a lawsuit against the principal to recover the funds.

The premium for a construction bond is the product of multiplying the bond amount by the premium rate the surety assigns to the principal through underwriting. The underwriting goal is to set a premium rate commensurate with the risk of the surety not being repaid for a claim paid on the principal’s behalf. That risk is measured by the principal’s personal credit score. 

A high credit score is regarded as reliable evidence of a low risk to the surety and low risk results in a low premium rate. A low credit score means the risk to the surety is higher, which calls for a higher premium rate.

The premium rate for a principal with good credit usually is in the range of 1% to 3%.

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