Insurance requirements that result in duplication or excessive coverage and, thus, excess expense are not in the interest of the client. It is not unusual for the insurance requirements to call for coverages that are not available or are not appropriate for the contract at hand. Just so with excessive warranties and guarantees. The terms of such insurances and guarantees are subject to change as a result of external influences, to include those applied by sureties, the insurers, manufacturers, suppliers and vendors. Coverages and limits desired should be established by the client and the client’s legal and insurance counsel. The client should carefully study the insurance provisions to be assured its interests are adequately protected. Clients may be assured the competent contractor will study the insurance provisions in order that the cost of the required insurance protection will be included in their bids. They will also include the cost of any other protection they require which is not specified.

BID SECURITY/BONDS: Excessive bid security (in excess of 5% of the bid), the terms of which result in confiscation of contractor assets rather than in making a public owner whole for the cost of untimely withdrawal of bid, tends to set the tone of the contract documents insofar as bidders are concerned. In other words, bid security should cover the owner’s actual damages and no more. The more confiscatory the terms of the contract, the less likely the competent contractor will provide a bid.

PERFORMANCE AND PAYMENT BONDS: A common practice in the construction marketplace is to required that those under contract provide separate performance and labor and material payment bonds covering 100% of the value of the contract. The former is intended to guarantee performance of the contract whereas the latter serves as a guarantee that those providing labor and/or material to the project will be paid by the prime contractor upon payment made promptly to the prime contractor. It should be understood that these two instruments are sold as a package to contractors possessed of the necessary skill and capital. If the contractor can obtain one, he can obtain the set. Additionally, the cost of the set is little more than the cost of just one. For the additional protection afforded by both, there is little or no additional expense and there is no impact on competition.

PUBLIC WORK CONSIDERATIONS: A little known provision of law relating to bonds may be found in Section 137 of State Finance Law. Section 137 requires that a variety of public entities in New York State, including all "Municipal Corporations" (by definition this includes school districts), must require 100% labor and material payment bonds on their work.

NEW YORK STATE LICENSED: Especial attention should be devoted to all forms of surety offered to determine whether the surety is authorized or licensed to do business in the State of New York. Spurious bonds appear in the marketplace on occasion. No public client should be burdened by such paper as it places competitors at a disadvantage and it provides no real protection to the public.

MAINTENANCE BONDS: A trend now exists to require contractors to provide maintenance or guarantee bonds covering the one-year guarantee period following completion of the work. In some cases, extra-legal retainage is sought to be held for that period. Such requirements are excessive and unnecessary. The performance and payment bonds already cover the one-year guarantee period.