Why Is This Bond Necessary?

This bond serves several critical purposes:

1. Ensures Compliance: Guarantees adherence to local and state regulations for work in public rights-of-way.

2. Protects Public Property: Ensures that roads, sidewalks, and other public assets are not left damaged or unsafe.

3. Holds Contractors Accountable: Provides a financial safety net for municipalities or property owners in case of non-compliance or poor workmanship.

In my observation, securing this bond is essential for gaining the trust of local authorities and ensuring the smooth progression of your project.

Who Needs This Bond?

A Right-of-Way Bond is typically required for:

• Contractors performing excavation, construction, or repair work in public rights-of-way.

• Utility companies installing or maintaining pipelines, cables, or other infrastructure.

• Property owners or developers constructing driveways or sidewalks that intersect public property.

Check with the local government or permitting office to confirm if a bond is required for your project.

How Does the Bond Work?

The bond is a three-party agreement:

1. Principal: The contractor or entity performing the work.

2. Obligee: The government agency or municipality requiring the bond.

3. Surety: The bonding company that issues the bond and guarantees compensation for valid claims.

If the contractor fails to complete the work as agreed, damages public property, or violates regulations, a claim can be filed against the bond. The surety compensates the claimant for valid claims, and the contractor must reimburse the surety for any payouts.

Bond Amount

The bond amount is typically determined by the obligee (government agency or municipality) and depends on the scope and scale of the project. Common bond amounts for right-of-way projects range from $5,000 to $50,000, but larger projects may require higher amounts.

Cost of the Bond

The cost of the bond, or premium, is a percentage of the bond amount. Factors influencing the premium include:

• Credit Score: Higher credit scores generally lead to lower premiums.

• Project Scope: Larger or more complex projects may have higher premiums.

• Business Experience: Established contractors may qualify for better rates.

Premiums typically range from 1% to 5% of the bond amount. For example:

• A $10,000 bond might cost between $100 and $500 annually.

• A $50,000 bond might cost between $500 and $2,500 annually.

How to Obtain a Right-of-Way Bond

1. Verify Requirements: Confirm the bond amount and terms with the local permitting office or municipality.

2. Submit an Application: Provide personal, business, and project details to a bonding company.

3. Undergo Underwriting: The surety evaluates your creditworthiness, experience, and financial stability to determine the premium.

4. Pay the Premium: Once approved, pay the premium to activate your bond.

5. File the Bond: Submit the bond to the obligee as part of your permitting process.

Maintaining Your Bond

To remain compliant:

• Renew Annually: Most bonds are valid for one year and must be renewed for ongoing projects.

• Follow Regulations: Adhere to all local ordinances and project specifications to avoid claims.

• Notify Changes: Update your surety of changes to your project or business details.

Benefits of the Bond

1. Legal Compliance: Meets local government requirements for right-of-way permits.

2. Public Trust: Demonstrates your accountability and commitment to protecting public property.

3. Financial Protection: Provides recourse for municipalities or property owners in case of damages or non-compliance.