Bonding in Rhode Island

A surety bond is a 3-party promise. The contractor (the principal) pays a surety company for a bond that a customer, subcontractor, or a government body (the obligee) 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. A bond protects the public. It is not insurance for the contractor. Rhode Island uses bonds in specific contractor-registration and public-works contexts. Keep these Rhode Island-specific bond contexts separate. 1. Contractors' Registration and Licensing Board (CRLB): registration, not a bond. Contractors required to register with the CRLB under R.I. Gen. Laws Chapter 5-65 (general contractors, residential remodelers, roofers) are not typically required to post a statewide surety bond as a condition of registration. CRLB conditions registration on liability insurance, workers' compensation compliance, registration fee, and consumer-protection rules. Verify current registration requirements on the CRLB site before assuming a bond is or is not required. Source: RI CRLB (https://crb.ri.gov/) and R.I. Gen. Laws Chapter 5-65 (http://webserver.rilegislature.gov/Statutes/TITLE5/5-65/INDEX.HTM). 2. Public works: R.I. Gen. Laws §37-12-1 et seq. (Rhode Island Little Miller Act). Rhode Island's Little Miller Act at R.I. Gen. Laws §37-12-1 requires contractors on state public-works contracts to furnish a payment bond equal to 100% of the contract price before work begins. Many solicitations also require a performance bond equal to 100% of the contract price. The payment bond protects subcontractors and suppliers, who perfect claims under the statutory notice procedures rather than by mechanic's lien against public property. Source: R.I. Gen. Laws Chapter 37-12 (http://webserver.rilegislature.gov/Statutes/TITLE37/37-12/INDEX.HTM). 3. Rhode Island Department of Transportation bonds. RIDOT construction contracts require bid, performance, and payment bonds under RIDOT Standard Specifications. Performance and payment bonds on RIDOT contracts are typically 100% of the contract price. Source: RI Department of Transportation (https://www.dot.ri.gov/). 4. Private construction: mechanic's lien. On private Rhode Island projects, subcontractors and suppliers rely on the mechanic's-lien procedure at R.I. Gen. Laws Chapter 34-28 rather than a contractor license bond. An owner may post a bond to discharge a lien under R.I. Gen. Laws §34-28-17; this is a project-specific lien tool, not a license bond. Source: R.I. Gen. Laws Chapter 34-28 (http://webserver.rilegislature.gov/Statutes/TITLE34/34-28/INDEX.HTM). 5. Workers' compensation self-insurance. An employer that elects to self-insure for workers' compensation under R.I. Gen. Laws §28-36 must file security with the Department of Labor and Training, which may include a surety bond. Standard practice is to carry workers' compensation through a carrier or through Beacon Mutual Insurance Company (a state-sponsored workers' compensation carrier). Source: Beacon Mutual (https://www.beaconmutual.com/) and RI DLT (https://dlt.ri.gov/). Premium math. A surety charges an annual premium, typically 1% to 3% of the bond face value for a contractor with strong credit and no prior claims. Weaker credit, tax liens, prior surety losses, or a new business can push the rate to 5% to 10% or more. Project performance and payment bonds on Rhode Island public-works contracts are priced per job, usually 0.5% to 3% of the contract price. Bond, insurance, and workers' compensation are separate requirements. A Rhode Island contractor typically carries general-liability insurance appropriate to the trade, commercial auto, and workers' compensation under R.I. Gen. Laws Chapter 28-29. Bonding is a per-project requirement on public work and specific private contracts. Verify each requirement against the current statute and the contract before you assume you are compliant.