01333031

Component

https://doi.org/10.3141/2228-01

http://scholar.google.com...jafi&publication_year=2011

A performance bond provides the assurance that an awarded construction project will be satisfactorily completed in the event that the contractor is unable to complete the project as agreed and the contract is terminated. First passed into U.S. law in the late 1800s, performance bonds protect against financial losses. The ability of contractors to provide a performance bond has mistakenly been assumed as a guarantee that contractors will perform well on the projects they are awarded. Indications are that there is a need to evaluate the benefits and the costs of using performance bonds. This paper examines the benefit–cost ratios of performance bonds on a national basis. Analysis was performed on state construction project data collected for contract awards from September 2007 to September 2009. The results of the analysis suggest that states with a small number of defaults, or none at all, did not benefit from having performance bonds, whereas those states with numerous defaults did benefit. In conclusion, the results suggest that performance bonds are beneficial to states that experience a large number of defaults.

01355107

11-0207

English

pp 3-10

2011

Transportation Research Record: Journal of the Transportation Research Board

9780309167376

Print

References (20) ; Tables (8)

Benefit cost analysis; Construction projects; Contract administration; Contractors; State departments of transportation; Surety bonds

Default

Construction; Economics; Highways; I10: Economics and Administration

PRP, TRIS, TRB, ATRI

Feb 17 2011 5:21PM

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