JASPER, Tenn. — City administrators have seen the problems that can ensue when work by a contractor is not insured, and now they are looking into permanently changing their policy on performance bonds.
Jasper Mayor Billy Simpson said performance bonds, which are issued by an insurance company or a bank to guarantee that a contractor completes a project satisfactorily, are required by state law for work totaling $100,000 or more.
The Jasper Board of Mayor and Aldermen is exploring the possibility of requiring performance bonds on any work totaling $25,000 or more.
“I think we’d be foolish not to do it,” Simpson said. “It is not always required, but we still want to cover ourselves because I can cite several instances where it didn’t happen and it caused huge problems.”
Attorney Billy Gouger, who is serving as Jasper’s interim attorney, said he recommends performance bonds on any major projects because they protect the town from harm.
“This type of bond does two things,” he said. “It guarantees the contractor will perform the services under the contract that you pay them to do. It is also a payment bond. Any suppliers or sub-contractors that are hired on a project are guaranteed to be paid. It prevents them from having to file a lien against city property.”
Performance bonds usually cost about $1,000, Gouger said, but that also buys peace of mind.
“For $1,000, you certainly couldn’t pay for an attorney or another contractor to come in and do what needs to be done for the completion of a project if the original contractor defaults,” he said. “If you don’t bond [contracted work], you open yourself up to a lot of bad possibilities.”
Officials said a performance bond also assures that a warranty on completed work is good for its duration even if the company that did the work goes out of business.
On Monday, the board asked Gouger to create a resolution dealing with performance bond practices, and members plan to vote on the issue at their next meeting on April 11.
“I don’t think there’s any question that this is something we should be doing,” Simpson said.
Ryan Lewis is based in Marion County. Contact him at email@example.com