Generally speaking a performance bond can cost anywhere from 0.5% to 1.5% of the awarded contract price inclusive of HST. Where the cost ultimately sits in this range depends on the amount of coverage the owner is requiring. Usually this is either 50% of the contract price or 100% of the contract price. The higher level of coverage requested the greater the cost. Warranty timelines will also impact the cost of a Performance Bond.
To determine pricing for a Contractor a surety company will evaluate the 3 C’s of Surety when looking at your application for a performance bond facility. These are character, capital and capacity. The more comfortable a surety company is with your business, its owners and the financial strength the lower the rate can go.
The amount of premium generated through your performance bond facility will also have an impact. Contractors who generate a lot of bond premium can expect lower rates than infrequent users of bonds.
Lastly, the duration of the contract can impact the cost. Rates are generally provided for a one-year period. If durations are in excess of 12 months then an additional premium may be charged. Surety companies may have special ratings for larger, long term projects so make sure you discuss with your surety broker to ensure you are receiving the best price.