Performance bonds are now acceptable in lieu of Letter of Credit for BEAD grant requirements.
A performance bond, often used in the construction industry and in large contracts, is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor.
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In essence, a performance bond is a risk management tool that protects the project owner from financial loss if the contractor does not fulfill their obligations.
Here's a breakdown of the key components of a performance bond:
Purpose: The bond ensures that the contractor completes the project as per the terms, specifications, and deadlines outlined in the contract. If the contractor fails to do so, the bond provides financial compensation to the project owner.
Process: When a contractor fails to complete a project as agreed, the obligee can make a claim on the bond. The surety then has to either ensure the completion of the contract or compensate the obligee for any financial losses.
Duration: The bond is typically active until the project is completed and a specified maintenance period (if any) has passed.
Under NTIA guidance, a grant applicant can provide a performance bond equal to 100% of the BEAD subaward amount in lieu of a letter of credit, provided that the bond is issued by a company holding a certificate of authority as an acceptable surety on federal bonds as identified in the Department of Treasury Circular 570.