Some contractors in Alabama will face a bid bond increase following the April 28 passage of Senate Bill 175. Individuals bidding on public works contracts with the Alabama Department of Transportation (ALDOT) will need to post a surety bond that is no less than five percent of the bid. SB 175 amends Section 39-2-4 of the Code of Alabama.
The legislation changes the maximum amount of the surety bond. Previously, it was capped at $10,000. SB 175 raises the maximum bid bond amount to $50,000 and takes effect immediately. Bid bonds ensure that contractors are submitting accurate bids and will not purposely underbid on a project. Before bid bonds were required, contractors could increase the project’s price as work continued or quit work before the project was complete if they were refused more payment. With a bond in place, contractors must honor their bids and other contracts or clients can file claims against their bonds. Proven claims paid out by the surety must be reimbursed by the bond holder (the contractor), so bonds deter contractors from misconduct.
Various bonds are required of contractors under the Miller Act, a federal statute that ensures contractors pay their subcontractors and complete work as promised. Each state has its own Little Miller Act in which they dictate specific bond amounts and any state-specific regulations. Alabama’s Little Miller Act can be found in Section 39-1-1 of the Code of Alabama.
Before purchasing a surety bond, verify with the obligee (the entity that requires the bond purchase) the correct bond amount. After verifying your bond amount, the experts at SuretyBonds.com can help you purchase a surety bond in Alabama.