Bonding in Oklahoma

A surety bond is a 3-party promise. The contractor (the principal) pays a surety company for a bond that a customer, a government entity, or an injured member of the public (the obligee or claimant) can draw against if the contractor breaks the rules the bond covers. The surety pays valid claims up to the bond face value. The contractor then owes the surety for what the surety paid out. Oklahoma runs one of the more unified state-level licensing schemes for the building trades, and each trade has a matching state-level bond requirement through the Oklahoma Construction Industries Board (CIB). 1. Electrical contractor license bond: $5,000. Under OAC 158:40-5-5, every active electrical contractor must furnish a license bond of $5,000 to the Bonds and Insurance Unit of the CIB. The bond is continuous with a 30-day cancellation notice and is conditioned on faithful and lawful performance of all work in Oklahoma for the benefit of persons injured or suffering financial loss by reason of failure of such performance. The bond is filed with the Bonds and Insurance Unit in lieu of all other license bonds to any political subdivision. Source: OAC 158:40-5-5 (https://oklahoma.gov/content/dam/ok/en/cib/documents/your-industry/electrical-industry/title_158_chapter_40.pdf). 2. Plumbing contractor license bond: $5,000. Under OAC 158:30-5-2, every active plumbing contractor must maintain a $5,000 corporate surety bond payable to the CIB. A contractor may satisfy the requirement with cash funds or a certificate of deposit in the amount of $5,000. The bond is in lieu of filing a bond with each municipality where the plumbing contractor works. Source: OAC 158:30-5-2 (https://oklahoma.gov/content/dam/ok/en/cib/documents/your-industry/plumbing-industry/title_158_chapter_30.pdf). 3. Mechanical (HVAC) contractor license bond: $5,000. Under OAC 158:50-5-3, a mechanical contractor must deposit a $5,000 corporate surety bond with the Bonds and Insurance Unit before license issuance. The bond is continuous with a 30-day cancellation notice to the Board and is in lieu of filing a bond with each municipality. Source: OAC 158:50-5-3 (https://oklahoma.gov/content/dam/ok/en/cib/documents/your-industry/mechanical-industry/ch_50_eff_10-1-20.pdf). Bond exception. The bond and insurance requirement may be waived for electrical, plumbing, and mechanical contractors who are employed by a corporation, partnership, public entity, or political subdivision that submits an affidavit agreeing the employee will only perform work on property owned by that employer and that the employer assumes all financial responsibility in lieu of the contractor providing bond and insurance. Inactive contractor status is also exempt from bond and insurance until the contractor returns to active status. 4. Insurance coverage paired with the bond. Each of the three trade rules also requires proof of general liability insurance, with coverage no less than $50,000 combined single limit for bodily injury and property damage (electrical per 158:40-5-5, plumbing per 158:30-5-2(g), mechanical per 158:50-5-3(b)). The Construction Industries Board must be added as a certificate holder to ensure notification if the policy is cancelled. 5. Public works bonds: the Oklahoma Public Competitive Bidding Act. Oklahoma Public Competitive Bidding Act contracts (state public construction) require statutory bonds before work begins under 61 O.S. Section 113. - Performance bond. Required on public construction contracts above the statutory threshold; the bond runs to the public body in the amount of the contract. - Payment bond. Required on public construction contracts above the statutory threshold; the bond runs to the benefit of subcontractors and suppliers. Subcontractors and suppliers on a bonded public job do not file mechanic's liens against public property. They perfect claims against the payment bond using the notice procedures in 61 O.S. Verify current thresholds on the solicitation and the Office of Management and Enterprise Services (OMES) website before bidding. 6. Private construction: lien rights under 42 O.S. On private Oklahoma projects, subcontractors and suppliers use the mechanic's and materialmen's lien procedures in Oklahoma Statutes Title 42. An owner or prime contractor may post a bond to discharge or substitute for a lien, which is a project-specific tool, not a license bond. 7. Premium math. A surety typically charges an annual premium of 1% to 3% of the $5,000 bond face value for a contractor with strong credit and no prior claims, which works out to roughly $100 to $250 per year in premium for a new trade shop. Weaker credit can push the rate to 5% or 10% of face, still a small-dollar number at $5,000. Public works performance and payment bonds are priced per job, usually 0.5% to 3% of the contract price depending on contract size and the contractor's financial statements. Bond, insurance, and workers' compensation are separate requirements. An Oklahoma contractor carries the $5,000 CIB license bond, general liability insurance at the state-minimum of $50,000 combined single limit (and realistically higher on commercial work), workers' compensation under 85A O.S., any public-works bond a solicitation triggers, and any additional registration or bond a city requires at the permit counter.