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What is a Timber Sales Surety Bond?

timber sales surety bond

A Timber Sales surety bond provides an obligee (state or federal government) a surety’s financial backing of a timber contractor’s ability to pay any amounts due to gain access to government land to harvest timber and other forestry related products as well as the contractor’s ability to harvest in a manner that adheres to the contract between the government and the contractor.

Timber sales surety bonds are a type of contract performance bond but the terms of government timber contracts differ from normal construction related contracts. An ordinary construction project contract involves an obligee (government agency with a contracted project) contracting with a principal (the contractor awarded the contract) to pay the principal a set amount of money to complete a job. The principal would consider the complete cost of completing the job, inclusive of surety bond costs, when negotiating or bidding on the contract. The obligee would pay the contractor the final determined figure to complete the contract. Timber sales contracts work different. The principal pays the obligee for access to the land for harvesting. The principal has to use their funds to cover harvesting the forestry products as well as covering the cost to adhere to any environmental concerns such as road maintenance, erosion control, natural resource protection and any other specified requirements. In short, the principal is wholly financially responsible for the operation and must have the funds to successfully complete it.

The timber sales contract bond provides the obligee with a financially backed surety guarantee that the principal will adhere to the terms of the contract. For this bond type, that means that the surety is guaranteeing the payment due the government from the principal for access to forestry land. The bond also covers the harvesting of the forestry products identified in the bond as well as the manner in which the products are harvested. If the principal fails to pay the government the required amount to gain access to the land, the potential for a claim arises. If the principal harvests in a manner that violates the terms of the contract, the potential for a claim arises as well. If a claim is filed on the bond, the surety will determine the validity of the claim and may be required to pay the claim up to the bond penalty amount. When this happens, the surety seeks to recover the funds expended on settling the claim by collecting from the principal. The principal is ultimately responsible for any amount spent settling claims on their bond.

How to Obtain a Timber Sales Surety Bond

Due to the nature of the contract associated with timber sales contract bonds, the underwriting process for these bonds can be more involved. The surety has to determine the likelihood of a claim being made on the bond. To do this the surety reviews the financial standing, credit standing as well as the company’s (principal) history and active projects. The surety needs to be able to see that the principal has the ability financially and materially to fulfill their obligation to the contract.

Some common items needed to underwrite a timber sales bond request are as follows:

  • Contract bond application (The simple online surety bond application is not sufficient for this bond type.)
  • Copy of the contract.
  • Bid tabulation.
  • Job cost breakdown.
  • Work on hand schedule.
  • Financial statements.
  • Verification of Assets.
  • The required bond forms. (Obtained from the obligee)
  • Evidence of pending timber sales, if any, is beneficial.

As with most other contract surety bonds, each request can have its own unique circumstances and the items needed for underwriting review can vary. It’s best to speak with one of our contract surety bond agents to know exactly what is required to underwriter your specific request.

Timber Sales Surety Bonding at Viking Bond Service

Viking Bond Service has been able to place these bond requests for our clients. We work with markets that write these bonds and we work to seek the best terms for our clients. Additionally, we work with the SBA in situations where underwriting the bond requires assistance from the SBA Surety Bond Guarantee program. There’s no better place to get your timber sales surety bond request fulfilled. Call us today to get started.

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