Earlier this month, the Design-Build Institute of America (DBIA) released the first-of-its-kind set of surety bond forms for design-build projects. This set of bonds can be particularly useful to AEC companies doing nonresidential design-build projects, be they governmental or commercial. It addresses some of the difficulties that have long plagued design-build construction.
Here is what exactly these bond forms offer and why they are so important for all sides involved.
The New DBIA Design-Build Bond Forms
The DBIA set of design-build includes: a proposal bond (610), a warranty bond (615), D-B performance and payments bonds (620 & 625), sub-performance and payment bonds (630 & 635), as well as general contractor performance and payment bonds (640 & 645).
Additionally, the set also features a number of ‘consent of surety’ documents which are relevant to design-build projects.
These new surety bonds weren’t created on a whim. Both the National Association of Surety Bond Producers (NASBP) and Surety & Fidelity Association of America (SFAA) carefully considered the documents and advised the DBIA in the process of their creation.
NASBP CEO Mark H. McCallum called them the “the most thoroughly vetted model bond forms.” And Lynn M. Schubert, president of SFAA, stated that anyone using them can be “assured that representatives of designers, builders and the surety industry believe they are at an excellent starting point for bonding in design-build projects.”
But why is a design-build surety bond necessary, and what exactly is so great about the new bonds?
Why Design-Build Bonds?
Every public and federal construction project needs a performance bond and a payment bond. Many private construction projects need these too. Yet, traditionally these bonds only concern the building part of a construction project.
In other words, traditional project delivery usually separates the building from the design as two distinct services, executed by distinct parties under two or more contracts. This includes the risks associated with either service. Both the designer and the contractor are individually liable to the owner, and these relationships are seen as two separate sets of risks.
Yet, with alternative project delivery methods such as design-build, these risks are united in one process, under one contract and carried by one team. However, most bonding instruments nowadays are not capable of carrying or accommodating the added risk that comes with including the design.
There is no way to separate the design from the construction on a performance bond for a design-build project. Not only is it is contrary to the logic of design-build as a method, it is also impossible with regards to state statutes and contracts on such projects.
Sureties have long struggled with finding the right solution to this challenge. Previously, they have usually issued combined performance bonds that include the design. Most often, these bonds have required additional assurances on the side of design professionals in order to be issued.
Additionally, design professionals have also been difficult to accommodate under payment bonds as they do not, as subcontractors or suppliers, literally deliver labor or materials. This has left designers vulnerable, and here, too, roundabout solutions have been sought.
A Welcome Initiative
These and other difficulties have made a set of specifically devised design-build bond forms direly needed and the DBIA has responded to this need. This need is also why both NASBP and the SFAA have embraced and supported the introduction of these bond forms.
It is yet to be seen how these exactly work and it is certain that their usefulness will be evaluated on a project basis and after extensive consultation with an attorney. But given the the efforts of all parties involved, the introduction of these bonds forms is certainly good news across the whole industry and sounds very promising. DBIA’s set of design-build bond forms can be acquired through their website.
Do you need a warranty or performance bond for your design-build project? Give us a call at (866) 450-3412 for a consultation or to get started on obtaining your bond. Our surety experts are there to respond to your questions and guide you through the process.