Supply bonds are a type of contract surety bond that ensures that a supplier will furnish all materials as described in the contract. It bears no obligation on the contractor’s labor. Supply bonds work like all other surety bonds as agreements made between three parties. The obligee is the party requesting the bond (the project owner or the state), the principal is the party obtaining the bond (the contractor participating in the bid) and the surety bond company is the party issuing the bond, which is also responsible for its financial backing. Not all public projects will require supply bonds and requirements differ between states. Although, federal projects that exceed $100,000 typically require a supply bond.
Allstar Surety provides supply bonds to contractors of all credit types. Contact a Surety expert today to learn more.