Contract & Construction Bonds
Performance, payment, and bid bonds for construction projects. Protect your projects and ensure compliance with contract requirements.
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3 Main Types of Construction Bonds
Bid Bonds, Performance Bonds, and Payment Bonds explained - the essential trio for construction projects
Learn about the three essential construction bonds that work together to protect all parties in construction projects: bid bonds for project bidding, performance bonds for project completion, and payment bonds for subcontractor protection.
Get Your Construction Bond QuoteEssential Construction Bonds
The three most common bonds required for construction projects
Guarantees the contractor will complete the project according to contract terms
Common Uses:
Ensures subcontractors and suppliers are paid for their work and materials
Common Uses:
Guarantees the contractor will honor their bid and provide required bonds if awarded
Common Uses:
All Contract & Construction Bonds
| Bond Type | Bond Amount | Starting Rate | Risk Level | Action |
|---|---|---|---|---|
Performance Bond Popular Guarantees the contractor will complete the project according to contract terms | 50% - 100% of contract value | $500 | Moderate | |
Payment Bond Popular Ensures subcontractors and suppliers are paid for their work and materials | 50% - 100% of contract value | $500 | Low | |
Bid Bond Popular Guarantees the contractor will honor their bid and provide required bonds if awarded | 5% - 20% of bid amount | $100 | Low | |
Maintenance Bond Guarantees defects will be repaired during the maintenance period | 50% - 100% of contract value | $300 | Moderate | |
Supply Bond Guarantees delivery of materials or equipment according to purchase agreement | 10% - 100% of supply value | $250 | Low | |
Subdivision Bond Guarantees completion of subdivision improvements like roads and utilities | 100% of improvement cost | $750 | High | |
Completion Bond Guarantees project completion if the original contractor defaults | 100% of remaining work | $1000 | High | |
Site Improvement Bond Guarantees completion of required site improvements and landscaping | 100% - 125% of improvement cost | $400 | Moderate | |
Right of Way Bond Guarantees restoration of public property after utility or construction work | Cost of restoration | $200 | Low |
Construction bonds protect project owners, subcontractors, and suppliers from financial loss if a contractor fails to complete work or pay their obligations. These bonds are often required for public works projects and large private contracts.
- Required for most public construction projects
- Protect owners, subs, and suppliers
- Often required as a set (bid, performance, payment)
- Bond amount based on contract value
Construction bonds require more extensive underwriting than license bonds. Bonding companies evaluate the contractor's experience, financial strength, and track record.
- Three years of financial statements
- Work-in-progress schedule
- Project experience and references
- Bank and trade references
"Most thorough academic treatment of surety bonds, covering all terminology, bond types, and practical applications"— Virginia Tech Construction Contracting Program
This comprehensive academic resource provides detailed coverage of construction bonds including bid bonds, performance bonds, and payment bonds. Perfect for contractors seeking in-depth understanding of bonding terminology, processes, and practical applications in construction contracting.
Read Virginia Tech Surety Bonds Chapter →Need Construction Bonding?
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