CEMP-E/CECW-E
EI 01D010
1 September 1997
of 12 months up to 24 months and 1 percent of the
and current. This example assumes a canal
basic premium for each month in excess of 24
excavation project in Tennessee to be accomplished
months.
at an estimated cost of .5 million, including profit
with a duration of 20 months. From table 12-2
g. If the consent of the surety is not required
excavation is found in Class B. Referring to the
and given for changes or extras, first and renewal
Class B rate schedule in table 12-1, the premium for
premiums for the additional cost thus caused are
a performance-payment bond written in the full
computed at manual rates from the date of the bond.
amount of the contract price (including bond) and by
a nondeviating Surety Association Company would
h. If the consent of the surety is required and
be calculated as follows:
given for changes or extras, premium for the
additional cost thus caused is computed at manual
Example 12-1 - Bond premium calculation
rates from the date of such surety's cost.
Estimated
Bond
Amount
x
Rate
=
Premium
12-5. Cost of Performance and Payment
Bonds
First
$ 100,000
@ .00/M
$ 2,500
a. Performance and payment bonds are
Next
400,000
@
15.00/M
6,000
normally obtained as a single package. The
premium is the same as for the performance bond
Next
2,000,000
@
10.00/M
20,000
alone. Rates vary with the type of the contract work,
the dollar value, and the length of the contract.
Anticipated Estimated Amount (inc. bond)
,500,000
,500
b. The coverage limit of performance bonds is
specified in each contract and is usually for the full
(20 mos - 12 mos = 8 mos surcharge)
amount of the contract price (bid amount). The
premium is adjusted at the completion of the work
Eight additional months @ 1%/ MONTH
for any modification changes in the contract price
other than changes due to time bonuses or penalties.
(8 mo x 1% x ,500)
2,280
If the original contract price is increased through
change order, the contractor must pay an additional
TOTAL PREMIUM
,780
premium. Conversely, if any part of the original
work is deleted and the original price thereby
reduced, the contractor will receive a refund from the
12-6. Civil Works Program Specific
surety.
Requirements
c. It should be noted the surety industry has
become a state regulated industry. The SAA issues
Most types of civil works projects are classified as
advisory rates, but these rates may or may not be
Class B.
accepted by the state involved. Therefore, actual
rates charged by surety corporations may vary from
12-7. HTRW Program Specific
state to state.
Requirements
d. Table 12-2 shows the various types and
The cost of performance bond for HTRW projects is
classes of bonds.
normally higher than for conventional construction
projects. This is primarily due to the surety industry
e. Example 12-1 illustrates the calculation of
concern regarding uncertainties related to changing
bond premium cost. Since the rates are subject to
state-of-the-art design requirements and risk
change and may vary by state, the calculations are to
associated with HTRW projects. The SAA does not
be used as a sample only. The cost engineer is
publish separate pricing guidelines for HTRW
responsible for ensuring the rates used are accurate
12-2
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