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Title: Performance Bond: Cost, Benefit, and Paradox for Public Highway Agencies
Accession Number: 01506372
Record Type: Component
Record URL: Availability: Transportation Research Board Business Office 500 Fifth Street, NW Find a library where document is available Abstract: In the highway industry, one of the main methods to prequalify a contractor is to determine if a performance bond can be secured from a commercial surety. The current performance bonding system does not differentiate between high-performing and marginal contractors. Two companies with the same level of financial assets have the same capability to furnish performance bonds. This paper details an analysis of the benefits and costs of performance bonds and reports the results of a study that used case studies in five state departments of transportation (DOTs): Iowa, Oklahoma, Utah, Virginia, and Washington. Structured interviews were also conducted with members of the construction contracting sector and the surety industry. The results showed that although average default rates were less than 1.0% and a performance bond added an average of 1.5% to the cost of every construction project, DOTs and contractors were reluctant to eliminate performance bonds from the industry. There lies a paradox: construction project owners are willing to pay an additional 1.5% to protect themselves from an event that occurs less that 1.0% of the time.
Monograph Title: Monograph Accession #: 01534208
Report/Paper Numbers: 14-3025
Language: English
Authors: Kraft, ElizabethPark, HeedaeGransberg, Douglas DPagination: pp 3–9
Publication Date: 2014
ISBN: 9780309294997
Media Type: Print
Features: Figures
(2)
; References
(15)
; Tables
(7)
TRT Terms: Geographic Terms: Subject Areas: Administration and Management; Construction; Highways; I10: Economics and Administration
Files: PRP, TRIS, TRB, ATRI
Created Date: Jan 27 2014 3:02PM
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