Contract Bonds - Performance, Payment & Bid Bonds
Secure construction and service contracts with comprehensive contract bonding. Required for most public projects and many private contracts. You pay nothing until your bond is issued and delivered.
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Contract Bond Types & Typical Amounts
The five main contract bonds used on public and private construction projects
Bid Bond
5-20%
Of bid amount. Often FREE when bundled with P&P bonds.
Performance Bond
100%
Of contract value. Guarantees project completion.
Payment Bond
100%
Of contract value. Protects subs & suppliers.
Maintenance Bond
50-100%
Of contract value. Covers post-completion defects.
Appeal Bond
110-125%
Of court judgment. Required to appeal a ruling.
Federal projects over $150,000 require performance and payment bonds at 100% under the Miller Act.
For detailed pricing, see our surety bond cost guide. The most common contract bond package is combined P&P bonds issued with a free bid bond.
What Are Contract Bonds?
Contract bonds are a category of surety bonds that guarantee 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. Contract bonds sit alongside commercial bonds as one of the two major categories in the surety industry.
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. Unlike insurance, where the insured is protected, contract bonds protect the project owner and downstream parties while requiring the contractor to repay the surety for any claims paid.
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.
Explore All Bond TypesTypes of Contract Bonds
Each contract bond serves a specific purpose in protecting project stakeholders
Performance Bonds
Guarantee project completion according to contract terms
Contract completion guarantee
100% of contract value
Payment Bonds
Ensure payment to subcontractors and suppliers
Protect subs and suppliers
50-100% of contract value
Performance & Payment Bonds (Combined)
Single bond combining both performance and payment protection - required for federal projects over $150K
Miller Act compliance
100% of contract value
Bid Bonds
Guarantee you will enter into contract if awarded
Bid submission requirement
5-10% of bid amount
Appeal Bonds
Required for appealing court decisions or judgments
Appeal legal judgments
110-125% of judgment
How to Get Your Contract Bond
Simple 4-step process to secure your contract bond. For a detailed walkthrough, read our surety bond application guide.
Submit Project Details
Provide contract amount, timeline, and owner information for accurate quote
Financial Review
Quick assessment of financial statements and contractor qualifications
Get Approved
Receive bond from Treasury-certified surety companies within 24 hours
Submit & Win
Execute bond, pay premium, and submit with your bid or contract
Federal Requirements (Miller Act)
Federal construction projects have specific bonding requirements under various acts. See our complete Miller Act guide for details.
Miller Act
Federal construction contracts over $150,000
Performance and payment bonds required
100% of contract value each
Davis-Bacon Act
Prevailing wage requirements for federal projects
Often requires bonding for compliance
Varies by project
Federal Acquisition Regulation (FAR)
Government contracting requirements
Bonding thresholds and requirements
Based on contract value
State Requirements
State "Little Miller Acts" have their own bonding thresholds and requirements. Many states also require contractor license bonds to operate.
California
Little Miller Acts
Public works projects over $25,000
Performance and payment bonds required
Texas
Chapter 2253
Public works over $100,000
Performance and payment bonds required
Florida
Public Construction Bond Law
Public projects over $100,000
Performance and payment bonds required
Need a contractor license bond for your state?
Frequently Asked Questions
Common questions about performance, payment, and bid bonds
What are contract bonds and why are they required?
Contract bonds guarantee contractors will fulfill contractual obligations including project completion, payment to subcontractors, and meeting contract requirements. Required by the Miller Act (implemented through FAR 28.102-1) for federal construction contracts over $150,000 and by state Little Miller Acts for public projects, these bonds protect project owners and ensure financial recourse if contractors default.
How do Miller Act bonds work for federal projects?
The Miller Act (40 U.S.C. 3131-3134), implemented through FAR 28.102-1, requires performance bonds and payment bonds for federal construction contracts over $150,000. 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.
What is the difference between performance and payment bonds?
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.
How much do contract bonds cost?
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.
What are Little Miller Acts and state requirements?
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 payment bonds for public works over $25,000, Texas requires performance bonds for government contracts over $100,000 (payment bonds over $25,000), and Florida requires bonds for public projects over $100,000. Each state sets its own thresholds and bonding requirements for public construction.
What is the difference between contract bonds and commercial bonds?
Contract bonds (performance, payment, bid) are project-specific and tied to a particular construction contract. Commercial bonds (license bonds, permit bonds, court bonds) are not tied to construction projects—they guarantee compliance with regulations, statutes, or court orders. Contract bonds are underwritten based on the contractor's ability to complete the project; commercial bonds are underwritten primarily on credit and financial standing.
Related Contract Bonds
Explore specific contract bond types for your project needs
Government Resources
Official sources for federal and state contract bonding requirements
Related Bond Types
Performance Bonds
Guarantee project completion per contract terms
Payment Bonds
Ensure subcontractors and suppliers get paid
Bid Bonds
Required to bid on public and federal projects
Construction Bonds
Complete guide to bonds for construction projects
Contractor License Bonds
State-required bonds to obtain a contractor license
Miller Act Requirements
Federal bonding requirements for government contracts
All content is researched from official state and federal sources (.gov) and verified before publication. BuySuretyBonds.com works with Treasury-certified, A- minimum rated surety carriers serving all 50 states.
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