A contractor submits a bid of $485,000 for a commercial project. What is the minimum bond amount required for this project under B&P Code Section 7071.5?
Correct Answer
D) $72,750
The bond must be at least 15% of the contract amount: $485,000 × 0.15 = $72,750. However, it cannot exceed the statutory maximum.
Why This Is the Correct Answer
Under B&P Code Section 7071.5, the contractor's bond for a specific project must be at least 15% of the contract amount. $485,000 × 0.15 = $72,750. This is the minimum bond required to ensure performance and payment protection on the project.
Why the Other Options Are Wrong
Option A: $48,500
$48,500 is incorrect. This represents 10% of the contract amount, not the required 15%. The correct percentage under Section 7071.5 is 15%.
Option B: $97,000
$97,000 is incorrect. This represents 20% of the contract amount, which exceeds the required 15% minimum under Section 7071.5.
Option C: $15,000
$15,000 is incorrect. This is the standard contractor's license bond amount, not a project-specific bond. The project bond must be calculated as a percentage of the contract value.
Memory Technique
Remember '15 for 15%': B&P Code Section 7071.5 — the section number 5 at the end reminds you to use 15% (5 × 3 = 15). Calculation: Contract amount × 0.15 = bond amount.
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