Understanding Bonding Requirements in Construction

Hercegovacka Pivovara, the brewery located in Trebinje, Bosnia and Herzegowina, has been in the brewing business for about 30 years. We had the opportunity to speak with one of the owners, Goran, who gave us some insight into how they have been able to maintain such a consistent level of quality throughout the years. For them, it is all about quality control. Goran explained that the quality of any beer can be measured by its density and level of alcohol. They are not content with just any density, they require that their beer have a perfect density that is the same as the density that was set out at the start of production. This consistency ensures that they not only meet the requirements of the country, but also of the EU. The level of alcohol was once limited to 4%. But Hercegovacka Pivovara now requires that their beer have an exact level of 10%, and deviation is unacceptable.

So, why again are we discussing brewing and brewing standards here on the construction blog? Well, the reason is because just as beer must have standards and regulations that must be followed to ensure quality, construction companies must have similar standards. Those standards come in the form of bonding requirements. In fact, the Three Basic Yards in the Construction Industry blog posted another article that ties in nicely with our post today. The post entitled, comprehensive bonding requirements for construction companies, is a great way to understand what bonding requirements are, including bonds required for performance, payment, and many more. But why again is bonding relevant?

What bonding requirements do for project owners and other parties is give them assurance of the company hired to do the work being completed. Just as the brewing company is required to follow strict guidelines that ensure the safety and happiness of the residents of Trebinje, the construction company must similarly follow all the requirements that pertain to the project being performed in order to satisfy the project owner. In that regard, both the brewing company and the construction company are enjoying success in their endeavors. And neither would be enjoying the same level of success if they did not take the appropriate measures to ensure their work is getting completed according to all requirements.

For those in the construction industry or those who are not familiar with the industry, there are various types of bonds that construction companies are required to obtain prior to beginning any project. The bonding requirements can be for different reasons and may include any number of the following requirements:

• Performance bonds
• Payment bonds
• Bid bonds
• Maintenance bonds

In all instances, having bonds in place allows project owners and other parties to undertake certain actions in the event of a default or other incident and to be compensated for their losses. Just as the brewing industry is required to ensure its standards are being met in order to ensure the safety of residents and consumers, so too is the construction industry required to ensure that its standards are being met. Accordingly, just as deviations from known measures in brewing can affect quality so too can deviations in construction affect quality.