150 questions · 180 min · 70% to pass
Question 1
What bond amount threshold triggers the Miller Act?
Answer: Federal contracts over $150,000
Question 2
What is an Employee Retirement Income Security Act (ERISA) fidelity bond requirement?
Answer: ERISA requires that every person who handles funds or property of an employee benefit plan be bonded for at least 10% of the plan assets they handle, with a minimum of $1,000 and a maximum of $500,000. This fidelity bond protects plan participants from losses caused by fraud or dishonesty by plan officials.
Question 3
When must a subcontractor file notice to claim a payment bond?
Answer: Within 90 days of last work
Question 4
What is the dollar threshold that triggers Miller Act bond requirements on federal construction contracts?
Answer: The Miller Act requires both performance and payment bonds for federal construction contracts exceeding $150,000. For contracts between $30,000 and $150,000, the contracting officer may require alternative protection such as payment bonds or other security, but full Miller Act bond requirements apply only above the $150,000 threshold.
Question 5
When a surety pays a claim, what right does it acquire against the principal?
Answer: When a surety pays a claim, it acquires the right of subrogation against the principal — the surety steps into the obligee's shoes and can pursue the principal for full reimbursement of amounts paid. This right is reinforced by the indemnity agreement signed at bond inception, which gives the surety a direct contractual claim against the principal.
Question 6
What recourse does a surety have against a principal who refuses to execute a contract after winning a bid?
Answer: The surety has a right of reimbursement against the principal under the indemnity agreement if the surety is required to pay a bid bond claim. The surety may also decline to issue future bonds for the principal, effectively removing them from the competitive bidding market for bonded public work.
Question 7
Who requires a license and permit bond?
Answer: Government entity
Question 8
What does a work in progress schedule help sureties assess?
Answer: If contractor is overextended
Question 9
What is the purpose of a bid bond in the construction industry?
Answer: A bid bond guarantees that if a contractor wins a bid, they will enter into the contract and provide any required performance and payment bonds. It protects the obligee (project owner) from the financial loss of re-bidding if the winning bidder refuses to execute the contract after being awarded the project.
Question 10
What happens to a bid bond after the contract is awarded to a different bidder?
Answer: Once the contract is awarded to another contractor, the unsuccessful bidder's bid bond is automatically released, and the surety has no further obligation under it. The bond is only triggered if the winning bidder refuses to execute the contract, at which point the obligee claims the difference in contract price from the surety.