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• Bonding Capacity—Many capital projects require both In the administration of contracts, all clauses in the contact
performance and payment bonds to protect the interests are important and must be adhered to to avoid breach of con-
of the owner in the event of contractor failure to com- tract situations. However, some clauses are more important
plete the work or failure to pay subcontractors and ven- than others. Among the more important clauses, in alphabet-
dors. In such cases, part of the contractor’s decision to ical order, are the following:
bid involves their bonding capacity. If a contractor has a • Audit—This clause typically outlines an owner’s right to
bonding capacity of $100 million and already has $85 perform reviews (audits) of contractor costs or records.
million in active projects underway, the contractor may Such clauses ordinarily outline what costs or records are
not be able to bid a new $50 million capital project unless subject to audit, when, and under what circumstances.
they can successfully convince their surety (bonding
company) to increase their bonding coverage limits. • Changes—This clause is critical. This is the clause that
allows the owner to direct changes to the work, including
• Personnel—A contractor considering as bid must look to plans, specifications, time of performance, means, and
its own staffing to determine whether it has sufficient methods. Absent a change clause, an owner is precluded
experienced personnel to perform the work during the from making changes to the work. Of particular impor-
period of anticipated performance. tance in this clause is whether the clause allows the owner
to unilaterally direct changes to the work (in which case,
• Equipment—If a project requires specialized equipment if the contractor refuses to comply with the directive, they
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