In the case of heavy construction projects and heavy highway projects, the obligee requiring a surety bond is usually a government body, such as a federal, state, or local municipality. The obligee will determine the bond amount, however, a surety company analyzes the risk of the contractor (ability to pay and likelihood of causing a claim) and measures their bonding capacity. Once a surety company bonds a contractor, the obligee knows that they are insured against a loss.

Typically required in conjunction with performance bonds, payment bonds are contract bonds that guarantee subcontractors and material suppliers all get paid in accordance with the initial bid or contract.

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