Contract Bonds - Performance, Payment & Bid Bonds
Secure construction and service contracts with comprehensive contract bonding. Required for most public projects and many private contracts.
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3 Main Types of Construction Bonds
Bid Bonds, Performance Bonds, and Payment Bonds explained - the essential trio for contract bonding
Learn about the three essential contract 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 Contract Bond QuoteWhat Are Contract Bonds?
Contract bonds guarantee that contractors will fulfill their contractual obligations. They protect project owners by providing financial recourse if a contractor fails to complete the work, pay subcontractors, or meet other contract requirements.
These bonds are typically required for construction projects, especially public works. The three main types - performance, payment, and bid bonds - work together to ensure project success and protect all parties involved in the construction process.
Types of Contract Bonds
Each contract bond serves a specific purpose in protecting project stakeholders.
Contract completion guarantee
100% of contract value
Protect subs and suppliers
50-100% of contract value
Bid submission requirement
5-10% of bid amount
Appeal legal judgments
110-125% of judgment
Federal Requirements (Miller Act)
Federal construction projects have specific bonding requirements under various acts.
Performance and payment bonds required
100% of contract value each
Often requires bonding for compliance
Varies by project
Bonding thresholds and requirements
Based on contract value
State Requirements
State "Little Miller Acts" have their own bonding thresholds and requirements.
Public works projects over $25,000
Performance and payment bonds required
Public works over $100,000
Performance and payment bonds required
Public projects over $200,000
Performance and payment bonds required
Application Process
Contract bonds require thorough underwriting and evaluation.
- Contract amount
- Project timeline
- Owner information
- Financial statements
- Bank references
- Surety questionnaire
- Credit check
- Capacity analysis
- Character review
- Bond execution
- Premium payment
- Project submission
Why Contract Bonds Matter
Benefits for all parties in the construction process.
Ensures project completion and payment to subs
Demonstrates financial stability and competence
Transfers performance risk to surety company
Required for most public and many private projects
Treasury-certified surety companies for federal projects
Federal contracting and bonding requirements
Federal Acquisition Regulation bonding rules
Frequently Asked Questions About Contract Bonds
Common questions about performance, payment, and bid bonds
Contract bonds guarantee contractors will fulfill contractual obligations including project completion, payment to subcontractors, and meeting contract requirements. Required by the Miller Act for federal projects over $100,000 and by state Little Miller Acts for public projects, these bonds protect project owners and ensure financial recourse if contractors default.
The Miller Act requires performance bonds and payment bonds for federal construction projects over $100,000. Performance bonds guarantee project completion per contract terms, while payment bonds ensure subcontractors and suppliers get paid. Both bonds equal 100% of contract value and must be from Treasury-certified surety companies.
Performance bonds guarantee contractors complete projects according to contract terms and protect owners from contractor default. Payment bonds ensure subcontractors and suppliers receive payment and protect them from contractor non-payment. Most public projects require both bonds together, each typically equaling 50-100% of contract value.
Contract bond premiums typically range from 0.5% to 3% of the bond amount annually. For example, a $1 million project requiring $1 million in bonds costs $5,000-$30,000 per year. Rates depend on contractor financial strength, experience, project type, and surety company underwriting assessment.
Little Miller Acts are state laws requiring performance and payment bonds for state public works projects, modeled after the federal Miller Act. Requirements vary by state: California requires bonds for projects over $25,000, Texas over $100,000, and Florida over $200,000. Each state sets its own thresholds and bonding requirements for public construction.
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