A performance bond typically covers what percentage of the contract value?
Correct Answer
C) 100% of contract value
Performance bonds are typically written for 100% of the contract value to ensure the surety can complete the work or compensate the owner if the contractor defaults on their obligations.
Why This Is the Correct Answer
Performance bonds are written for 100% of the contract value because they must provide complete financial protection to the project owner. If a contractor defaults, the surety company needs sufficient coverage to either complete the remaining work or compensate the owner for the full contract amount. This full coverage ensures the owner can fulfill their project obligations without financial loss due to contractor default.
Why the Other Options Are Wrong
Option A: 50% of contract value
75% coverage would still leave the owner with 25% exposure to financial loss, which defeats the purpose of requiring a performance bond for complete project protection.
Option B: 75% of contract value
50% coverage would be insufficient to protect the owner's interests, as it would only cover half the contract value, leaving the owner exposed to significant financial risk if the contractor defaults on a partially completed project.
Option D: 110% of contract value
110% would be excessive and unnecessarily expensive, as the bond only needs to cover the actual contract value, not exceed it. This would create an unreasonable financial burden on contractors.
Memory Technique
Think 'Performance = Perfect Protection = 100%' - the bond must match the contract value exactly to provide complete coverage.
Reference Hint
Florida Building Code, Chapter 1, Section on Contractor Bonds and Insurance Requirements
More Contract Admin Questions
A project experiences a 30-day delay due to unusually severe weather. The contract includes a liquidated damages clause of $1,000 per day for delays. If the weather delay is excusable but not compensable, what liquidated damages apply?
A commercial project requires a total of 12 inspections. The building department charges $85 per inspection for the first 5 inspections, $65 for inspections 6-10, and $45 for any additional inspections. What is the total inspection fee?
What document must be posted at the job site before a Certificate of Occupancy can be issued for a commercial building?
A mixed-use development requires a variance for reduced setbacks. The property is located within 500 feet of a hospital. What additional consideration must be addressed?
A LEED project requires tracking of regional materials. Materials are considered regional if they are extracted, harvested, or recovered, as well as manufactured within what distance of the project site?
An indemnification clause in a construction contract typically requires the contractor to:
A property owner wants to convert a single-family home into a duplex in an area zoned for single-family residential use. The conversion meets all building codes but violates density requirements. What approval is needed?
As-built drawings are typically required to be submitted:
AIA Document A401 is primarily used for:
A general contractor is building a 12,000 square foot commercial warehouse. The building permit fee is calculated at $8.50 per $1,000 of construction value. If the project value is $2,400,000, what is the building permit fee?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Project Management
60 questions · 70% to pass