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Ryan Tash Vice President ryan@surety1 Office: 916-737-5723

We Do It Fast. We Make It Simple. Surety Bonds 101. Ryan Tash Vice President ryan@surety1.com Office: 916-737-5723. 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723. What We’ll Cover. Principles of a surety bond

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Ryan Tash Vice President ryan@surety1 Office: 916-737-5723

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  1. We Do It Fast. We Make It Simple. Surety Bonds 101 Ryan Tash Vice President ryan@surety1.com Office: 916-737-5723 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

  2. What We’ll Cover • Principles of a surety bond • Type of bonds you will likely see and what purpose each serves • How bonds are priced. How bonds are charged • Real life scenarios of fraudulent bonds • How to verify validity of a bond • Closeout procedure for bonds 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

  3. What is a Surety Bond? Principal Obligee City/Agency Contractor Surety 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

  4. Types of Bonds • Bid Bond • Guaranties to the obligee that the surety and contractor will enter into contract at the bid price if awarded the contract • Performance Bond • Guaranties to the obligee that the contractor will perform project to specifications of the project • Payment Bond • Guaranties to the obligee that all suppliers and subcontractors are paid in accordance with bid and state laws (prevailing wage) • Guaranty Bond (Maintenance Bond) • Guaranties to the obligee that any repairs covered under the warranty are covered under the terms of the contract 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

  5. Cost of Surety Bonds • Cost and Qualifying is Based on Contract Amount Not Bond Amount • Why is This Important? • Annual, JOCs, Task Order, IDIQ • Contracts where bond percentage is less contract amount • Return and Overrun Premium 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

  6. What Does It Prevent? Hopefully this! – Unfinished work and unpaid subs In Layman’s terms, a performance bond protects the public’s interest, a payment bond protects the subcontractors and suppliers from non-payment 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

  7. Fraudulent Bonds Fraud can happen a number of different ways. Some recent examples: Example of contractor committing the fraud In 2011, Advantage Demolition and Engineering President pleads guilty to fraud for bogus bonds on $3.5 million worth of water meter installation projects in 2009 for the City of Sacramento. City caught wind of this after the contractor was having issues on the job. He used counterfeit seals and signatures to make bonds appear legitimate. 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

  8. More Fraudulent Bonds • Example of individual surety agent committing fraud • In 2013, individual surety agents forged the signatures of former Chubb Surety executive in bogus bonds. While this deception could have been done by any agent, it stemmed from an individual surety, who represents contractors that could not get bonded in the corporate surety market – the first red flag. • Example of agent committing fraud • In 2009, Maryland agent sentenced for issuing $535 million worth of bogus bonds through legitimate surety companies. He issued bonds not approved, then pocketed $22.5 million worth of premiums. 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

  9. How to Prevent • Fraud is Impossible to Completely Prevent • There have always been criminals out there and there always will. Bonds are not universally filed somewhere where you can check validity. • Implement an Internal Bond Verification System • Call Agent if Unsure. 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

  10. Steps To Verifying a Bond • Read the bond first. Look for a bond number, surety name, contractor name, date, contract amount, etc • Match Power of Attorney paper with bond. • Check notary acknowledgement and stamps • Make sure bond is sealed with proper surety company seal. • Verify company is treasury listed and licensed to do business in your state • http://www.fiscal.treasury.gov/fsreports/ref/suretyBnd/c570_a-z.htm • Google ‘am best rating and surety company name’ • Do NOT accept bonds from ‘individual sureties’ • Call the agent to verify the bond number or… • Call the surety company to verify bond number 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

  11. Bond Form • SampleBond Form • Bond number when you call to agent/surety to verify bond • Principal name is correct • Verify surety company on treasury list website. • Bond amount is correct • Verify it’s dated • Verify it’s signed, sealed, and notarized.

  12. Power of Attorney • Sample POA • Verify surety is correct • Verify agent is listed • Verify bond is within limits stated • Verify commission expiration date of notary acknowledgement • Verify it’s dated • Verify it’s sealed if on copied paper. Not all POA are on watermarked paper.

  13. Verbally Verifying a Bond Script to Verify a Bond Call agent or surety “Hello, my name is John Smith from the City of Sacramento and calling to verify a bond. The bond number is 2439876, contractor is Do It Right Construction, and the project is Library Restroom Remodel. Is this a valid bond?” 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

  14. Closing a Bond • Public Works Construction • Performance and Payment bonds are generally non-cancellable. It follows the contract and closed when the obligations of the contractor are fulfilled. • Surety Companies close bonds once obligee completes and signs a status inquiry, verifying completion date, contract price, and payment status. • Subdivision (grading, permit, off-site,etc.) • Though these bonds have terms, they do not cancel either. In place until work is complete • Surety companies close bonds once obilgee provides a letter of acceptance and releases. 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

  15. Feel free to call or email me with any questions about bonding as they arise throughout the year Questions? Ryan Tash ryan@surety1.com 916-737-5723 3225 Monier Circle, Ste 100 ● Rancho Cordova, CA 95742 ● www.surety1.com ● 916-737-5723

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