Surety Bonding and Owner‐Contractor Prequalification: Comparison

Abstract

In the public sector, contract awards are typically made to the “lowest responsible bidder.” This term is defined by many contract‐awarding authorities as the contractor with the lowest bid who provides the bonds required by contract. Numerous professionals believe this approach is an inefficient and ineffective means to procure construction services. This paper provides a description of the competitive‐bid process along with a more complete definition of lowest responsible bidder. The definition incorporates bid responsiveness and bidder responsibility—criteria to measure both are outlined. A review of surety bonding is presented. Agencies have been dissatisfied with contractors' performance and quality of work under traditional procurement procedures. As a result, they have investigated and developed prequalification procedures. The potential role of these procedures are presented along with a comparison between surety bonding and owner contractor prequalification. A brief discussion of prequalification versus postqualification is also described.