Oregon 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 Oregon 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 Oregon Construction Bond?

Oregon construction bonds protect the owners of public works or private construction projects against financial losses caused by the unlawful or unethical actions of the contractors they hire. They not only mandate contractor compliance with statutes and contractual specifications but also require contractors to pay valid claims for monetary damages resulting from noncompliance.

What Types of Oregon Construction Bonds May Be Needed?

In Oregon, all contractors seeking licensure by the state must furnish a contractor license bond.

Oregon’s “Little Miller Act,” the state’s version of the federal Miller Act, requires both performance bonds and payment bonds for projects valued in excess of $100,000. Each of these bonds must be in an amount equal to 100% of the contract value. The only exception is public transportation projects, for which the threshold for the bond requirement is only $50,000. 

Private construction projects are exempt from Oregon’s Little Miller Act. But, many private project owners are choosing to require both performance and payment bonds from their contractors, especially for higher-value projects. And both government contracting authorities and private project owners can require a bid bond from contractors competing for a construction project.

Other construction bonds that contractors doing business in Oregon may need to purchase include:

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

How Does an Oregon Construction Bond Work?

Construction bonds involve three parties:

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

Upon receipt of a claim from the obligee or other injured party, the surety will determine whether it’s valid. The principal is legally obligated to pay valid claims, but few contractors have enough liquidity to be able to pay a claim quickly. That’s why the surety’s guarantee that valid claims will be paid takes the form of an agreement to extend credit to the principal for that purpose if necessary. In fact, the surety will pay the claim on the principal’s behalf and give the principal some time to repay the resulting debt. Not repaying the debt in accordance with the surety’s credit terms typically results in the surety taking legal action to recover the claim amount, plus court costs and legal fees.

How Much Does It Cost?

Calculating the premium for a construction bond is a simple matter of multiplying the bond amount the obligee requires by the premium rate the surety assigns to the principal. The premium rate is based on the risk to the surety—specifically, the risk of not being repaid for claims paid on the principal’s behalf. The accepted measure of that risk is the principal’s personal credit score. 

A high credit score is considered strong evidence of low risk, while a low score is a red flag for higher risk. Low risk merits a low premium rate, but high risk warrants a higher premium.

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 Oregon 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 Oregon Construction Bond?

Oregon construction bonds protect the owners of public works or private construction projects against financial losses caused by the unlawful or unethical actions of the contractors they hire. They not only mandate contractor compliance with statutes and contractual specifications but also require contractors to pay valid claims for monetary damages resulting from noncompliance.

 

In Oregon, all contractors seeking licensure by the state must furnish a contractor license bond.

Oregon’s “Little Miller Act,” the state’s version of the federal Miller Act, requires both performance bonds and payment bonds for projects valued in excess of $100,000. Each of these bonds must be in an amount equal to 100% of the contract value. The only exception is public transportation projects, for which the threshold for the bond requirement is only $50,000. 

Private construction projects are exempt from Oregon’s Little Miller Act. But, many private project owners are choosing to require both performance and payment bonds from their contractors, especially for higher-value projects. And both government contracting authorities and private project owners can require a bid bond from contractors competing for a construction project.

Other construction bonds that contractors doing business in Oregon may need to purchase include:

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

Construction bonds involve three parties:

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

Upon receipt of a claim from the obligee or other injured party, the surety will determine whether it’s valid. The principal is legally obligated to pay valid claims, but few contractors have enough liquidity to be able to pay a claim quickly. That’s why the surety’s guarantee that valid claims will be paid takes the form of an agreement to extend credit to the principal for that purpose if necessary. In fact, the surety will pay the claim on the principal’s behalf and give the principal some time to repay the resulting debt. Not repaying the debt in accordance with the surety’s credit terms typically results in the surety taking legal action to recover the claim amount, plus court costs and legal fees.

Calculating the premium for a construction bond is a simple matter of multiplying the bond amount the obligee requires by the premium rate the surety assigns to the principal. The premium rate is based on the risk to the surety—specifically, the risk of not being repaid for claims paid on the principal’s behalf. The accepted measure of that risk is the principal’s personal credit score. 

A high credit score is considered strong evidence of low risk, while a low score is a red flag for higher risk. Low risk merits a low premium rate, but high risk warrants a higher premium.

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

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Request a quote online or call today to speak with one of our surety bond experts about obtaining an Oregon construction bond.