What does it mean when a Surety provides a performance bond?

When a Surety provides a performance bond, it means that they are guaranteeing the completion of the project by the Contractor. This form of bond serves as a financial safety net for the project owner, ensuring that if the Contractor fails to meet the contractual obligations or complete the work as specified, the Surety will step in to either complete the project or provide compensation up to the bond amount. This protects the owner from financial losses and ensures that the project can be finished without incurring additional costs.

The other options do not reflect the purpose of a performance bond accurately. Funding the project in case of cost overruns pertains more to financing or payment bonds, while conducting safety inspections is typically the responsibility of the project oversight authorities or managers, not the Surety. Hiring subcontractors is generally the Contractor's responsibility, and while the Surety may assess the Contractor's capabilities, they do not directly hire subcontractors.