Contract Bonds - Performance, Payment & Bid Bonds
Secure construction and service contracts with comprehensive contract bonding. Required for most public projects and many private contracts.
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
Common Questions
Performance bonds guarantee project completion, while payment bonds ensure subcontractors and suppliers get paid. Both are often required together on public projects.
Contract bond premiums typically range from 0.5% to 3% of the bond amount annually, depending on the contractor's financial strength, experience, and project risk factors.
Sureties evaluate the "Three C's": Character (reputation), Capacity (financial resources), and Capital (working capital and net worth). Financial statements, references, and project experience are key.
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