Wisconsin Performance Bonds

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Surety Bond Professionals is a family owned and operated bonding agency with over 75 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your performance bond needs.

What Are Wisconsin Performance Bonds?

Public and private construction project owners in Wisconsin can experience significant financial damage when a contractor fails to complete a job in accordance with legal and/or contractual requirements. A contractor (the “principal”) purchasing a performance bond is guaranteeing the project owner (the bond’s “obligee”) that the job will be completed lawfully and ethically. The bond also serves as a guarantee to compensate the obligee for losses resulting from the principal’s noncompliance.

Who Needs Them?

Wisconsin’s “Little Miller Act,” the state’s version of the federal Miller Act, is codified in the Wisconsin Statutes, Chapter 779, under “Public Construction Bonds.” It establishes bonding requirements for state-funded construction projects. All state-funded construction projects valued in excess of $30,000 require a performance bond in an amount equal to 100% of the project’s value.

Although private construction projects aren’t subject to the Little Miller Act, contractor default or malfeasance is always a concern. Many private project owners require contractors to provide performance bonds, especially for higher value jobs.

How Do Wisconsin Performance Bonds Work?

In addition to the obligee and the principal, there is a third party to a Wisconsin performance bond—the bond’s guarantor, known as the “surety.” The surety’s guarantee takes the form of an agreement to extend credit to the principal for the purpose of paying a valid claim if that should become necessary. In fact, the surety will pay the claim on the principal’s behalf, and the principal must repay the resulting debt in accordance with the surety’s credit terms. The surety will take legal action to recover the funds if not repaid by the principal.

How Much Do They Cost?

The premium for a Wisconsin performance bond is the product of multiplying the bond amount by the premium rate. While the bond amount is established by the obligee based on the project value, the surety sets the premium rate for each principal based on their creditworthiness. The main concern is the risk of the principal not repaying the surety for credit extended in paying a claim on the principal’s behalf. The standard measure of credit risk is the principal’s personal credit score.

A high credit score is evidence of low credit risk, so a low premium rate is appropriate. The risk inherent in guaranteeing a performance bond for someone with poor credit is much higher, which warrants a higher premium rate.

A well-qualified principal typically will be assigned a premium rate in the range of .5% to 3%.

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