Bid Bond vs Performance Bond: What's the Difference?
A bid bond guarantees you'll sign the contract and post the required bonds if you win; a performance bond guarantees you'll actually finish the work once you do. They cover different promises, they're sized by different formulas, and they exist at different points in the same project — the bid bond dies at award, the performance bond is just getting started. Most contractors who search this question have already noticed their bid bond percentage and their performance bond dollar amount don't match, which is normal: they're not supposed to.
Statutes verified against 40 U.S.C. §3131, FAR 28.101-1, FAR 28.101-2, FAR 28.102-2, and FAR 52.228-1 as of August 4, 2026. Figures cross-checked against this site's bid bond and performance bond hub pages to avoid conflicting numbers.
One Project, Three Bonding Moments
Competitor pages compare the two bonds as a static table. The table matters, but it misses the part contractors actually get tripped up on: the sequence. Here's what happens to your bonding obligation at each stage of a public construction project, in order.
Bid Day
You submit your bid with a bid bond attached — the penal sum is a percentage of your bid, not a flat fee, and it's almost always issued at no premium to a qualified contractor.
- Penal sum: usually 5-10% of bid (FAR ceiling: 20%, capped at $3M)
- Guarantees only that you'll sign if awarded — nothing about the work itself
Award
The contracting officer accepts your bid. Losing bidders get their bid guarantees released almost immediately; you get a short clock to sign and get bonded for real.
- You have ~10 days to execute the contract & furnish new bonds (FAR 52.228-1)
- Miss the window and the government can terminate for default and bill you the difference
Notice to Proceed
Your bid bond is discharged — it did its job. In its place, a performance bond and payment bond (each sized off the full contract price) go on file before you break ground.
- Performance bond: 100% of contract price by default (FAR 28.102-2)
- Payment bond: same 100%, and by statute never less than the performance bond (40 U.S.C. §3131(b))
The takeaway: a bid bond and a performance bond are never both "active" on the same contract at the same time. One closes out exactly when the other opens. If you're quoting a project and someone asks for both simultaneously outside this handoff window, that's worth a second look.
Bid Bond vs Performance Bond, Side by Side
Once you know where each bond sits in the timeline above, the differences below make more sense — they're not arbitrary, they follow from what each bond is actually guaranteeing.
Bid Bond vs Performance Bond
Same construction contract, two different instruments
| Question | Bid Bond | Performance Bond |
|---|---|---|
| What does it guarantee? | You'll sign the contract and furnish required bonds if awarded | You'll complete the work per the contract's terms and specs |
| When is it active? | From bid submission until award (or bid rejection) | From Notice to Proceed until final acceptance / warranty period |
| Typical penal sum | 5-10% of bid amount (FAR max: 20%, capped at $3M) | 100% of contract price (FAR default; can be reduced in writing) |
| Governing rule | FAR 28.101-1 and 28.101-2 (bid guarantee policy and amount) | 40 U.S.C. §3131(b) and FAR 28.102-2 (Miller Act implementation) |
| Typical cost | Usually free for qualified contractors | 0.5-3% of contract price for well-qualified contractors |
| Who is protected? | The project owner — against a winning bidder who backs out | The project owner — against a contractor who fails to finish |
| Federal threshold | Required whenever a performance bond is required (FAR 28.101-1) | Required on federal construction contracts over $150,000 |
The bid bond percentage and the performance bond dollar amount are calculated independently — a higher bid-bond percentage does not mean a higher performance bond, and vice versa. See the penal-sum math below.
Sources: 40 U.S.C. §3131 · FAR 28.101-1 · FAR 28.101-2 · FAR 28.102-2 · FAR 52.228-1 (acquisition.gov)
The Penal-Sum Math, Worked Out
Most guides state the percentages and stop there. Here's what they produce on an actual bid, so the $200,000 bid bond above doesn't get mistaken for a $200,000 performance bond.
Bid Bond Penal Sum
10% is a common commercial figure set in the bid documents; FAR 28.101-2(b) caps the bid guarantee at 20% of the bid price and $3,000,000, whichever is lower.
Performance Bond Penal Sum
FAR 28.102-2: performance bonds on contracts over $150,000 default to 100% of the original contract price, plus 100% of any price increase.
Same $2 million project, ten times the exposure. The bid bond only ever needs to cover the gap between your bid and what it costs the government to re-award the work if you walk away — that's why 5-10% is usually plenty. The performance bond has to cover the entire cost of finishing the project if you can't, which is why it's written at the full contract value.
What Happens to Everyone Else's Bid Bond
Your bid bond's story ends at award. Every other bidder's ends sooner — and understanding both halves explains why sureties treat bid bonds as low-risk.
If you lose the bid
- Bids are opened and read publicly (sealed bidding) or evaluated (negotiated procurement).
- Once you're confirmed as not in contention, the contracting officer returns your bid guarantee "as soon as practicable" — you don't wait for the whole procurement to close out.
- Nothing further is owed on either side. You paid no premium and forfeit nothing.
If you win and can't follow through
- You miss the window to execute the contract or furnish the performance/payment bonds.
- The contracting officer can terminate for default and re-procure the work, per FAR 52.228-1.
- Your surety pays the bid spread — the difference between your bid and the next lowest responsive bid — up to the bid guarantee's penal sum.
- You owe the surety everything it paid, plus investigation and legal costs, under the general indemnity agreement you signed to get bonded in the first place.
- On federal work, failing to honor a bid can lead to suspension or debarment from future government contracts — a consequence that outlasts the bid-spread payment itself.
Why sureties barely price bid bonds
Because the second scenario above is genuinely rare — sureties underwrite your performance-bond capacity before issuing the bid bond in the first place. If a surety doesn't believe you can be bonded for 100% of the contract price later, it won't issue the bid bond now. That underwriting-in-advance is the real reason bid bonds are usually free: the surety has already done the hard work of qualifying you for the bond that actually carries the risk.
The Statute and FAR Sections Behind Every Number Above
Not a paraphrase — these are the exact provisions this page's figures come from.
Official Federal Requirements
"Before any contract of more than $100,000 is awarded for the construction, alteration, or repair of any public building or public work of the Federal Government, a person must furnish to the Government the following bonds... (1) Performance bond... (2) Payment bond... The amount of the payment bond shall not be less than the amount of the performance bond."40 U.S.C. §3131(b) — the Miller Act • 40 U.S.C. §3131(b)
Official Federal Requirements
"A contracting officer shall not require a bid guarantee unless a performance bond or a performance and payment bond is also required... bid guarantees shall be required whenever a performance bond or a performance and payment bond is required."Federal Acquisition Regulation — Acquisition.gov • FAR 28.101-1
Official Federal Requirements
"The bid guarantee amount shall be at least 20 percent of the bid price but shall not exceed $3 million."Federal Acquisition Regulation — Acquisition.gov • FAR 28.101-2(b)
Official Federal Requirements
"[For contracts exceeding $150,000] the penal amount of performance bonds must equal (i) 100 percent of the original contract price; and (ii) if the contract price increases, an additional amount equal to 100 percent of the increase."Federal Acquisition Regulation — Acquisition.gov • FAR 28.102-2
External links use rel="nofollow noopener noreferrer" and open the official Acquisition.gov or U.S. Code source directly.
The Full Sequence: Bid → Performance → Payment
Performance bonds don't travel alone — on federal contracts over $150,000, a payment bond is required alongside it. Here's all three bonds in the order a contractor actually encounters them.
The Three-Bond Public-Works Sequence
Each bond covers a different promise, at a different stage
1. Bid Bond
5-10% of bid
Active from bid submission to award
- Guarantees you sign if awarded
- Usually issued free
- Discharged at award
2. Performance Bond
100% of contract price
Active from Notice to Proceed to project completion
- Guarantees the work gets finished
- 0.5-3% annual premium typical
- Required over $150,000 (FAR 28.102-1)
3. Payment Bond
100% of contract price, min.
Active in parallel with the performance bond
- Protects subs, suppliers, laborers
- Substitutes for liens on public property
- Never less than the performance bond (40 U.S.C. §3131(b))
Federal construction sequence per 40 U.S.C. §3131-3134 and FAR Subpart 28.1. State 'Little Miller Act' sequences follow the same three-bond pattern with different thresholds and percentages.
Can't Get Either Bond Through the Standard Market? The SBA Backs Both
If a conventional surety declines your bid bond — or pre-qualifies you for a bid bond but won't commit to the performance bond that follows it — the SBA Surety Bond Guarantee Program can make both bonds possible by absorbing part of the surety's risk.
$9M
Maximum contract amount the SBA will guarantee on any individual bid, performance, or payment bond — federal or non-federal.
$14M
Ceiling on federal contracts specifically, when the contracting officer signs a certification that the SBA guarantee is necessary for a responsible small business to compete.
The program guarantees a percentage of the loss a surety would otherwise absorb if you default — which is why it applies to the same bid bond and performance bond covered throughout this page, not a separate product. It doesn't replace underwriting; it gives a surety enough of a backstop to bond a small business it would otherwise decline. Coverage runs through SBA-approved surety agents, not a direct SBA application.
Questions About the Handoff Between the Two Bonds
The core distinction is answered in the first paragraph of this page. The questions below go further — into what happens at the exact moment one bond ends and the other begins.
What actually happens to my bid bond once I win the contract?
Does my bid bond turn into my performance bond, or do I need a whole new bond?
My bid bond was 10% of a $2 million bid — is my performance bond also $200,000?
What if I win the bid and then can't get bonded for the performance bond?
Can I get a performance bond without ever posting a bid bond?
Why is the payment bond amount tied to the performance bond instead of the bid bond?
Know which bond you need right now?
Whether you're still bidding or already have Notice to Proceed, tell us your contract value and we'll route you to the right bond — usually in about two minutes.
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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.
Related coverage on this site
Everything below ties back to the bid-to-performance handoff — the bond hubs themselves, the pricing guides, and the statutes referenced above.
Often free for qualified contractors, all 50 states.
100% of contract price, Treasury-certified carriers.
Required alongside performance bonds over $150,000.
The combined bond most sureties issue as a package.
All three construction bonding types in one overview.
50-state Little Miller Act thresholds and claim data.
Same instrument, different RFP-vs-IFB vocabulary.
State-by-state performance bond thresholds and rules.
The 100%-of-contract-price math, worked in detail.
The federal statute behind every figure on this page.
50-state equivalents of the federal $150,000 threshold.
State-by-state pricing for the bond covered in Stage 1 above.
State-by-state pricing for the bond covered in Stage 3 above.
The bond that travels alongside the performance bond.
How claims differ across bid, performance, and payment bonds.
Cross-bond-type pricing, credit-tier impact, worked examples.
The three-party structure behind every bond on this page.
Every bonding product a builder might need in one place.
Enter your contract value, see the estimated premium.
Estimate your bid bond penal sum before you submit.
Every BuySuretyBonds.com educational guide, organized by bond type.
Full bond-type directory and state directory.
Bid bond today, performance bond at award — we handle both
Tell us your project value and where you are in the process. We'll show the estimated penal sum for the right bond, and if you're a qualified contractor, we typically pre-underwrite you for the performance bond you'll need later at the same time.
- Estimated penal sum shown before you enter contact info
- Treasury-certified carriers, Miller Act compliant
- We track your award date so your performance bond is ready before NTP