How will the new surety bond requirement affect your business?
By Jeff Sorg, OnlineEd Blog
This article is a guest post by Todd Bryant, President and Founder of Bryant Surety Bonds.
(April 12, 2016) – Change is coming for construction in Oregon: starting next year, construction flagging contractors will be required to post a surety bond. The new requirement was included in Senate Bill 596, which was signed into law last summer.
Most construction professionals are already familiar with surety bonds. Public construction jobs, and even some private ones, usually require a number of contract bonds from their contractors and subcontractors. These bonds are meant to safeguard the agreement between a contractor and a project owner, which the contractor will complete their job according to their contract, and in a timely manner.
Flagging Contractors Will Need a License Bond
The new requirement for Oregon flagging contractors is a shift, however, because it stipulates that these contractors must now hold a contractor license bond in the state of Oregon. Along with their license application, flagging contractors will have to post a $20,000 surety bond, which guarantees that they’ll follow all the laws regulating their profession and that they’ll perform their duties as promised.
For anyone who’s new to license bonds, $20,000 might sound steep. However, this number represents the maximum amount of coverage the bond provides in case of a claim, not the actual cost of the bond. To get bonded, Oregon flagging contractors will have to pay a premium, which is usually between 1% and 4% of the bond amount for those with good credit. This means a $20,000 bond might cost as little as a few hundred dollars, for someone with an excellent credit history.
Like all license bonds, this one will have to be renewed concurrently with the contractor license. And, like all surety bonds, this one holds the possibility of a bond claim. Flagging contractors who aren’t in compliance could face a claim on their bond from an affected party.
The new law was put into place to ensure the safety of construction projects that interfere with traffic; for drivers, construction workers, and flaggers themselves. It specifically applies to contractors who perform flagging as their primary function, i.e., who direct traffic at a work site. Previously, flagging contractors were performing sensitive work in sometimes dangerous construction sites, without the bonding requirements that other contractors must follow.
Senate Bill 596 sought to clear up this discrepancy, to make sure all workers and motorists are protected in case of noncompliance. Generally, any business that’s required to obtain a flagging contractor license will also have to carry the $20,000 surety bond. There are a few exemptions, including commercial general contractors (levels 1 and 2), commercial specialty contractors (again, level 1 and 2), and residential contractors. Anyone working for federal or local government organizations is also exempt, along with any business that’s regulated by the Public Utility Commission.
For Oregon flagging contractors who are unsure about how this new law will affect them, there’s still some time. Senate Bill 596 takes effect on July 17th, 2017. Anyone with questions about whether their contracting company is included in the new requirements should contact the Oregon Construction Contractors Board.
About Todd Bryant: Mr. Bryant is the president and founder of Bryant Surety Bonds. He is a surety bonds expert with years of experience in helping contractors get bonded and start their business.
For more information about OnlineEd and their education for Oregon contractors visit www.OnlineEd.com.
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Jeff Sorg is a co-founder of OnlineEd®, a Web-based vocational school founded in 1997 where he also serves as Corporate Secretary, Chief Operating Officer, and School Director. Sorg holds vocational instructor licenses in Oregon, Washington, California, and Nevada and has authored numerous pre-licensing and continuing education courses. Sorg was awarded the International Distance Education Certification Center’s CDEi Designation for distance education in 2008.
OnlineEd® provides real estate, mortgage broker, insurance, and contractor pre-license, post-license, continuing education, career enhancement, and professional development and designation courses over the Internet.