Supply Bonds
A supply bond guarantees that a supplier will deliver the materials, equipment or products in a supply contract, in the quantity, quality and timeframe the contract calls for. If the supplier fails to deliver, the buyer can make a claim against the bond to recover its loss, such as the extra cost of buying the goods elsewhere. Supply bonds are common when government agencies, school districts and other public entities buy supplies, and some private buyers require them too.
How a supply bond works
The bond is an agreement among three parties: you, the supplier (principal); the buyer or agency that requires the bond (obligee); and the surety that issues it. If you don't deliver, deliver late or deliver goods that don't meet the contract, the buyer can make a claim. The surety investigates, and a valid claim is paid up to the bond amount. If the surety pays a claim, you must repay the surety.
Supply bond vs. performance bond
A supply bond is a type of performance bond for contracts to furnish goods rather than to build or perform work. It guarantees delivery of what you sold. If your contract also includes installation or construction work, the buyer may require a performance bond instead of or in addition to a supply bond. Check your contract or solicitation to see which bond is required.
Bond amount and your premium
The supply contract or solicitation sets the bond amount, often as a percentage of the contract value or the full contract price. That amount is the coverage required, not the price you pay. Your premium depends on the surety's underwriting, including your credit, financial statements, experience and the size of the contract. Request a quote for your contract rather than relying on a fixed rate.
How to apply
Apply as soon as you learn the contract requires a supply bond, since the buyer may need it before the contract starts. Start the online application with your business information and the contract details. If the solicitation also requires a bid bond, ask about it when you apply. WWIS will review your submission and help you with the quote, required documents and issuance. Approval and timing depend on the surety and a complete application.
Information needed to apply
- The supply contract or solicitation, including the buyer, goods, quantities, delivery schedule and contract price.
- The required bond amount and any bond form the buyer requires. Federal contracts use Standard Form 1418 for performance bonds on contracts other than construction.
- Business and personal financial information, which the surety may request based on the size of the contract.
- Your experience supplying similar goods and your arrangements with manufacturers or vendors.
Supplying a federal agency?
Federal agencies may require a performance bond on supply and other non-construction contracts above the simplified acquisition threshold when it is needed to protect the government. Examples include contracts where the government provides property or funds to the contractor, or makes substantial progress payments before delivery begins. Contractors with several federal contracts in a fiscal year may be able to use one annual performance bond instead of separate bonds.
Get help with your application
Call 888-518-8011 or email [email protected] for help selecting the bond and completing your application.
If you or your business needs help in obtaining a surety bond or commercial insurance give us a call!