Which type of bond guarantees that the contractor will pay all subcontractors, suppliers, and laborers?
Correct Answer
C) Payment bond
A payment bond guarantees that the contractor will pay all subcontractors, suppliers, and laborers. Performance bonds guarantee completion of the work, while bid bonds guarantee the contractor will enter into the contract if awarded.
Why This Is the Correct Answer
A payment bond specifically protects subcontractors, suppliers, and laborers by guaranteeing they will be paid for their work and materials. This bond ensures that if the general contractor fails to pay these parties, the surety company will step in to make the payments. Payment bonds are required on most public projects and many private projects to protect the supply chain participants from non-payment risks. The bond creates a financial safety net that allows subcontractors and suppliers to pursue claims against the surety if they are not paid by the contractor.
Why the Other Options Are Wrong
Option A: Bid bond
A bid bond guarantees that if a contractor is awarded a project, they will enter into the contract and provide the required performance and payment bonds. It does not guarantee payment to subcontractors or suppliers - it only ensures the contractor will honor their bid commitment.
Option B: Performance bond
A performance bond guarantees that the contractor will complete the work according to the contract specifications, schedule, and quality standards. While important for project completion, it does not address payment obligations to subcontractors, suppliers, or laborers.
Option D: Maintenance bond
A maintenance bond (also called a warranty bond) guarantees that the contractor will remedy any defects in workmanship or materials that appear during a specified warranty period after project completion. It does not cover payment obligations to project participants.
Memory Technique
Use the acronym 'BPPM' for bond types: Bid (enter contract), Performance (complete work), Payment (pay people), Maintenance (fix defects). Payment bond = Pay People who worked on the project.
Reference Hint
Florida Building Code, Chapter 1, Section 107 - Bonds and Insurance requirements, or Florida Statutes Chapter 255 - Public Construction Bonds
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?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Project Management
60 questions · 70% to pass