South Dakota 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 South Dakota 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 a South Dakota Construction Bond?

South Dakota construction bonds are designed to protect construction project owners against the financial harm that can result from a contractor’s unlawful or non-compliant actions. They fulfill this purpose by:

  1. requiring the contractor purchasing the bond (known as the bond’s “principal”) to operate in full compliance with all applicable statutory and contractual requirements and
  2. providing a source of funds for compensating the project owner (the bond’s “obligee”) or other injured party for monetary damages caused by the principal’s violation of the law or the terms and specifications contained in the construction contract. 

What Types of South Dakota Construction Bonds May Be Needed?

In South Dakota, only electrical and plumbing contractors are licensed at the state level, which requires the purchase of a contractor license bond. Some county or city contracting authorities require general contractors to obtain a local license, which may also necessitate a contractor license bond. 

South Dakota’s “Little Miller Act,” the state’s version of the federal Miller Act, requires both performance bonds and payment bonds for all public works projects, regardless of their value. However, this bonding requirement can be waived for projects valued below $25,000. 

Private construction projects are not subject to South Dakota’s Little Miller Act, but private project owners may choose to protect themselves by requiring their contractors to furnish both performance and payment bonds. And both public and private project owners can make providing a bid bond mandatory for contractors in competitive bidding situations. 

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

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

How Does a South Dakota Construction Bond Work?

Every construction bond involves three parties—the obligee, the principal, and the bond’s guarantor, known as the “surety.” The surety’s guarantee that any valid claim will be paid is in the form of an agreement to lend the principal the funds needed to pay it, if necessary. In practice, the surety will pay the claim initially, as an extension of credit to the principal. But that doesn’t eliminate the principal’s legal obligation to pay a valid claim. It simply transforms it into the legal obligation to repay the debt to the surety in accordance with the surety’s credit terms. The surety will take legal action against the principal to recover the debt if need be.

How Much Does It Cost?

The premium cost of a South Carolina construction bond is the product of multiplying the bond amount by the premium rate assigned by the surety on a case-by-case basis. The premium rate will reflect the risk of the surety not being repaid for claims paid on the principal’s behalf, as measured by the principal’s personal credit score. 

A high credit score is reliable evidence of low risk, so the premium rate will be low. On the other hand, a low credit score means the risk is higher, which warrants 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 South Dakota 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 a South Dakota Construction Bond?

South Dakota construction bonds are designed to protect construction project owners against the financial harm that can result from a contractor’s unlawful or non-compliant actions. They fulfill this purpose by:

  1. requiring the contractor purchasing the bond (known as the bond’s “principal”) to operate in full compliance with all applicable statutory and contractual requirements and
  2. providing a source of funds for compensating the project owner (the bond’s “obligee”) or other injured party for monetary damages caused by the principal’s violation of the law or the terms and specifications contained in the construction contract. 

In South Dakota, only electrical and plumbing contractors are licensed at the state level, which requires the purchase of a contractor license bond. Some county or city contracting authorities require general contractors to obtain a local license, which may also necessitate a contractor license bond. 

South Dakota’s “Little Miller Act,” the state’s version of the federal Miller Act, requires both performance bonds and payment bonds for all public works projects, regardless of their value. However, this bonding requirement can be waived for projects valued below $25,000. 

Private construction projects are not subject to South Dakota’s Little Miller Act, but private project owners may choose to protect themselves by requiring their contractors to furnish both performance and payment bonds. And both public and private project owners can make providing a bid bond mandatory for contractors in competitive bidding situations. 

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

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

Every construction bond involves three parties—the obligee, the principal, and the bond’s guarantor, known as the “surety.” The surety’s guarantee that any valid claim will be paid is in the form of an agreement to lend the principal the funds needed to pay it, if necessary. In practice, the surety will pay the claim initially, as an extension of credit to the principal. But that doesn’t eliminate the principal’s legal obligation to pay a valid claim. It simply transforms it into the legal obligation to repay the debt to the surety in accordance with the surety’s credit terms. The surety will take legal action against the principal to recover the debt if need be.

The premium cost of a South Carolina construction bond is the product of multiplying the bond amount by the premium rate assigned by the surety on a case-by-case basis. The premium rate will reflect the risk of the surety not being repaid for claims paid on the principal’s behalf, as measured by the principal’s personal credit score. 

A high credit score is reliable evidence of low risk, so the premium rate will be low. On the other hand, a low credit score means the risk is higher, which warrants 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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Request a quote online or call today to speak with one of our surety bond experts about obtaining a South Dakota construction bond.