New Headstart Subcontractor Performance Bond
A Better Bond for General Contractors
The Headstart Subcontractor Performance Bond was created by the surety industry in response to concerns expressed by general contractors about the lengthy process involved with investigating a subcontractor default claim.
Under the traditional claims resolution process, a general contractor faced with a subcontractor default will have to wait for the surety company to complete a full investigation of the claim before they will honor the construction bond. This time delay often compounds losses as delays can quickly erode profits in ongoing construction projects.
The Headstart Performance Bond provides an alternative for the general contractor. It provides for a much quicker claims resolution process at a time when it is most critical. It will allow a general contractor to propose and implement its own claim mitigation solution.
Features of the Headstart Bond
- The bond contains a URL linking to The Notice of Claim Letter and Mitigation Agreement. These documents are to be completed and submitted to the surety by the general contractor. These documents are always accessible to the general contractor so he/she can be prepared for a quick submission when a claim arises.
- When submitting a claim, the general contractor will attach a suggested mitigation proposal outlining their preferred alternate method of completing the bonded work.
- Following the submission of the claim, the surety must respond within three (3) business days, either granting the general contractor the right to begin their alternative completion proposal or denying the claim and going forward with the traditional claims resolution process. This allows for a more timely completion of the project.
- The completed Notice of Claim Letter eliminates technical issues that can slow the claims process while the proposal for completion by the general contractor can result in a job restart within days of the initial notice without necessarily having to retender the work.
The Headstart Subcontractor Performance Bond was introduced because the surety industry realized that the current CCDC 221 -2002 performance bond doesn’t facilitate a rapid response in the event of a subcontractor default. Over the last 15 years this has caused general contractors to source different subcontractor default insurance products such as sub-guard.
Only Headstart will allow a general contractor to restart work on a project before the surety has an opportunity to fully investigate the circumstances surrounding an alleged default under the construction contract. It is an innovative solution to a problem that has longed plagued the industry. With the goal of completing work on time and on budget, it’s a step in the right direction.
Update: November 27th, 2020
With the adoption of the new Construction Act in Ontario several of the improvements considered in the headstart performance bond are now included in the Ontario mandatory bond forms. This includes clear claim forms and stricter response timelines. For General Contractors, having the conditions of the performance bond they supply to the project owner match the conditions of the performance bonds they receive from their subcontractors is critical.
The last thing a general contractor would want is a project owner to claim on their bond due to an issue caused by a sub-contractor and then realize that the timelines for responding under their performance bond with the project owner were much stricter than those of the performance bond with the subcontractor that caused the issue and for which they the general contractor will ultimately look to recover.