Estimating Practice Exam

What type of bond can provide assurance of performance from subtrades?

1. insurance bond

2. performance bond

3. surety bond

4. retention bond

The correct answer is: performance bond

A performance bond is specifically designed to provide assurance of the contractor's ability to fulfill their contractual obligations, including those related to subtrades. It acts as a guarantee that the project will be completed according to the terms agreed upon in the contract. If the contractor fails to meet these obligations, the bond protects the project owner by ensuring that funds are available to cover any losses incurred as a result of this failure. In practice, a performance bond is often issued by a surety company, which assesses the contractor’s financial stability and capacity to complete the project. Thus, while the terms 'surety bond' can sometimes be used interchangeably with performance bonds in a general context, the performance bond specifically refers to the promise regarding the execution of work and safeguarding against non-performance. Other options do not provide the same level of assurance regarding performance from subtrades. For example, an insurance bond pertains to insurance coverage rather than performance guarantees, while retention bonds are related to holding back a portion of payment until satisfactory completion of a project, rather than assuring performance.