South Carolina SCDOT Performance/Payment Bond: A Comprehensive Guide

This guide provides information for insurance agents to help their customers obtain a South Carolina SCDOT Performance/Payment bond.

At a Glance:

• Lowest Cost: 1% of the bond amount
• Bond Amount: 
  • Performance Bond: 100% of the contract amount
  • Payment Bond: 50% of the contract amount
• Who Needs it: Contractors hired by the South Carolina Department of Transportation (SCDOT) to work on a project costing $10,000 or more
• Purpose: To ensure the SCDOT and project laborers/suppliers receive compensation for financial harm if the contractor fails to complete the project or provide payments owed
• Who Requires it: The South Carolina Department of Transportation

Background

South Carolina Statute 57-5-1660 requires all contractors that have been awarded a contract by the SCDOT costing $10,000 or more to purchase both a performance and a payment surety bond. The South Carolina legislature enacted the bonding requirement to ensure that contractors complete the project and pay all laborers and material suppliers. Contractors must become prequalified with the SCDOT before being awarded any contracts with the department.

What is the Purpose of the South Carolina SCDOT Performance/Payment Bond?

South Carolina requires contractors to purchase surety bonds as a prerequisite to being awarded a project costing $10,000 or more from the SCDOT. The bonds ensure that the SCDOT, as well as all laborers and material suppliers, will receive compensation for financial harm if the contractor fails to abide by the regulations outlined in South Carolina Statute 57-5-1660. Specifically, the bond protects the SCDOT if the contractor fails to complete the project and laborers/suppliers if the contractor fails to pay. In short, the bond is a type of insurance that protects the SCDOT, laborers, and suppliers if the contractor violates the terms of the contract.

How Can an Insurance Agent Obtain a South Carolina SCDOT Performance/Payment Surety Bond?

BondExchange makes obtaining a South Carolina SCDOT Performance/Payment bond easy. Simply login to your account and use our keyword search to find the “Performance” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.

At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.

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What are the Underwriting Requirements for the South Carolina Performance/Payment Bond?

Surety companies will examine the following factors when determining your customer’s eligibility and pricing for the South Carolina Performance/Payment bond:

• Contractor’s credit history
• Contractor’s experience
• Contractor’s personal and business financial statements (not required for bonds with limits lower than $500,000)
• Project length
• Project cost
• Whether or not a bid bond was obtained

How Much Does the South Carolina Performance/Payment Bond Cost?

South Carolina Performance/Payment bonds with limits of less than $1 million will typically cost 3% of the bond amount, while bonds with limits of $1 million or more can cost anywhere between 1% to 3% of the bond amount. Surety companies will determine the rate based on factors such as your customer’s credit score and years of business experience.

Most larger bonds ($1 million or more) are rated using a sliding scale, as outlined below:

$20,000 Encroachment Permit Bond Cost

*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.

Who is Required to Purchase the Bond?

South Carolina requires contractors awarded contracts owned by the SCDOT and costing $10,000 or more to purchase surety bonds as a prerequisite to beginning work. To paraphrase South Carolina Statute 40-11-20, a contractor is a person that provides construction or mechanical services as an independent business.

BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.

How do South Carolina Contractors Bid on SCDOT Contracts?

Contractors in South Carolina must navigate several steps to become qualified to bid on a SCDOT contract. Below are the general guidelines, but applicants should refer to the SCDOT’s prequalification page for details on the process.

Step 1 – Obtain a State License

South Carolina requires all general and mechanical contractors operating in the state to obtain a license from the South Carolina Contractors License Board. General and mechanical contractors must purchase a separate surety bond as a prerequisite to obtaining a state license. Information on the South Carolina General and Mechanical Contractor License and bond can be found here.

Step 2 – Become Prequalified

Contractors seeking to submit bids on projects owned by the SCDOT must become prequalified. The pre-qualification process is intended to ensure that contractors submitting bids on SCDOT projects are capable of completing them. All prequalification applications should be mailed to the following address:

Director of Construction
South Carolina Department of Transportation
955 Park Street, Room 332
Columbia, South Carolina 29201

Contractors must complete the application in its entirety and submit one of the following items:

• • Copy of an Experience Modification Rate (EMR) Notification sheet from the National Council of Compensation Insurance (NCCI) showing the applicant’s company name, EMR, and effective date of their EMR.
  • Statement from the applicant’s workers’ compensation agent or carrier including the applicant’s company name, EMR, and effective date of their EMR.
  • If an EMR has not been issued, applicants must submit a letter from their workers’ compensation insurance agent stating the reason one has not been issued and the effective date of the workers’ compensation policy.

Additionally, contractors must fill out a spreadsheet supplying information on subcontractors that have provided quotes for work in relation to bids the contractor has submitted on SCDOT projects and email it to [email protected].

Step 3 – Submit a Bid

Contractors that are licensed and prequalified may submit bids on SCDOT projects. All bids, unless explicitly stated otherwise, must be submitted online through Bid Express, to which contractors must subscribe and then download their electronic bidding program, Expedite Bid. Contractors must pay a fee prior to submitting a bid.

Step 4 – Purchase a Surety Bond

After having their bids approved, contractors working on projects costing $10,000 or more must purchase and maintain surety bonds with the following limits:

• • Performance Bond: 100% of the contract amount
  • Payment Bond: 50% of the contract amount

How do South Carolina Contractors Renew Their State Licenses and SCDOT Prequalifications?

General and mechanical contractors can renew their state licenses online here. All South Carolina General Contractor Licenses expire on October 31 of even-numbered years (2022, 2024, etc.) and all South Carolina Mechanical Contractor Licenses expire on October 31 of odd-numbered years (2023, 2025, etc.).

Additionally, contractors must renew their SCDOT prequalifications annually and can do so by completing either a short form or long form application, as outlined in the Schedule for Expiration Dates and Application Forms, and mailing them to the following address:

Director of Construction
South Carolina Department of Transportation
955 Park Street, Room 332
Columbia, South Carolina 29201

What are the Insurance Requirements for South Carolina Contractors Submitting Bids to the SCDOT?

South Carolina requires all contractors with employees to purchase workers’ compensation insurance. Additionally, contractors working on projects costing $10,000 or more must purchase surety bonds with the following limits:

• Performance Bond: 100% of the contract amount
• Payment Bond: 50% of the contract amount

How do South Carolina Contractors File Their SCDOT Performance/Payment Bonds?

Contractors should submit their completed bond forms, including the power of attorney, to the SCDOT, county, or road district overseeing the project.

The surety bond requires signatures, including witness signatures, from both the surety company that issues the bond and from the applicant. The surety company should include the following information on the bond forms:

• Project name, number, and location
• Date the contract is signed
• Legal name, address, and phone number of the entity/individual(s) buying the bond
• Surety company’s name, address, and phone number
• Bond amount
• Date of the bond is signed

What can Contractors do to Avoid Claims Against Their SCDOT Performance/Payment Bonds?

To avoid claims made against their SCDOT Performance/Payment bonds, South Carolina contractors must ensure that they complete the entire project and pay all laborers and suppliers on time and in full.

What Other Insurance Products Can Agents Offer Contractors in South Carolina?

South Carolina requires contractors with employees to purchase workers’ compensation insurance. Additionally, most reputable contractors will purchase liability insurance. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.

How Can Insurance Agents Prospect for South Carolina SCDOT Performance/Payment Bond Customers?

The SCDOT conveniently provides a list of all bids they have received, which agents can use to prospect for new business. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.