Parties Involved in Surety Bond

All surety bonds are essentially tripartite contracts, the bond gives a guarantee that the building design can be accomplished according to the construction agreement provision. The three parties involved in this bond are

1) The project owner,
2) The contractor, and
3) Finally the surety firm.

The surety firm, mediate contractor's guarantee on the project owner that the construction will be completed on schedule, and if the contractor turns out default on the construction project, they (the surety firm) will intervene to ensure that the construction project can be completed, as many as the "face amount" mentioned on the bond. (face amount typically comparable the money amount of the agreement.) The surety firm has a few "cures" available in ensuring construction project completion, and it includes employing a different construction contractor to complete the construction project, financially helping (or "shoring up") the defaulting construction contractor throughout the project progress, and recouping the project owner losses based on the agreed amount, as many as the bond face amount.
By definition there are 3 surety bonds you might need: 1) the performance bond, 2) payment bond, and 3) bid bond. A bid bond is issued based on your bid, and it gives guarantee to the obligee (or "project owner") that you'll take part in an agreement and offer the owner with payment and performance bonds if you're the lowest bidder available. If you won the project you'll give the obligee with a payment bond and a performance bond. A performance bond offers the project performance portion of the guarantee. While the payment bond assures that you, as the prime or general contractor, will pay up the subcontractors and suppliers consistently according to the contracts.
If you can't provide the obligee with a bond, you are not allowed to participate in the bidding. Constructions are an unstable industry, and the bonds offer the obligee a safety net if everything goes poorly. And, by giving a surety bond, you are informing the obligee that the surety firm has approved the basics of your construction project, and has found that you are competent for the job.