Resources & Insights

Dispute Resolution Meets Construction Surety Bonds

November 15, 2019

Tom Patton,
Surety Advisor

They have a reputation for sometimes going a bit slow, but sureties pay billions of dollars a year in claims.

In the past 15 years alone, surety companies paid nearly $12 billion to complete construction contracts and pay subcontractors and suppliers what they were owed. Those figures don’t include what sureties spent to keep troubled contractors afloat so they could complete contracts and avoid a default.

It’s why surety bonds remain one of the smartest risk-management tools for the construction industry.

While there’s disagreement over exactly when the first documented surety was written, these financial instruments have been around since the Sumerians civilized the world thousands of years ago. Fundamentally, not much has changed in the surety world across those centuries. Until recently, that is. Now, there’s a new surety form that would have undoubtedly caught the attention of those ancient Mesopotamian general contractors, especially any involved in bigger public-private partnerships.

We’re talking about Expedited Dispute Resolution bonds, or EDRs,  a type of Performance Bond designed to do just what their name suggests: using independent third parties to evaluate and help resolve disputes quickly to keep construction projects as close to on schedule as possible.

Setting deadlines, of course, helps keep everyone focused. That, in turn, gives all concerned the peace of mind they need that the surety will perform its obligations – including payment obligations – within the agreed period of time.

How much more quickly will you get to resolution with an EDR bond? Typically, within 45 to 60 days, no matter how complex things have gotten. That’s huge in situations that typically take months, if not years, to resolve.

If you’re a state or local authority inking a public-private deal, aka a P3, an Expedited Dispute Resolution bond could save yourself hassles, delays and even the taxpayers some money. Same goes for the GCs on the job.

Indiana no doubt wished it had an EDR bond in place on its $325 million extension of Interstate 69 a few years back. The state was forced to cancel the contract after a string of delays but ended up covering millions of dollars in higher construction costs out of its own pocket. That was in large part because it had reduced the bond requirements to far less than the project’s cost. But an EDR bond would, at a minimum, have compelled all involved to speed things up.

There’s another good reason for GCs to embrace EDR bonds:

They can reduce the letter-of-credit requirements for a project, thereby freeing up the contractor’s credit capacity to be used elsewhere in its business. In other words, making it easier to keep growing your business.

Of course, Expedited Disputed Resolution bonds aren’t for everyone. But if you’re a smaller GC, there are elements to an EDR bond that can be inserted into a conventional Performance Bond. There’s more to all of this, as in all matters related to surety and insurance, so feel free to reach out with any questions.

Tom Patton is a Surety Advisor with CCIG. Reach him at or 720-330-7922.

CCIG is a Denver-area insurance, employee benefits and surety brokerage with clients nationwide. We do more than make sure you have the right policy or bond. We offer you risk and claims management expertise and a commitment to service excellence.

Also read: Six Ways to Expand Your Contact Bond Capacity


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