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Get a quotePayment Bond Cost by State: 50-State Table
Payment bond cost runs 0.5%-3% of the contract value, priced as part of a combined premium with the performance bond on the same job — the prime contractor pays one number, not two. What varies by state isn't really the rate; it's the dollar amount at which a bond becomes legally required in the first place. Most states use one threshold for both bonds. A few, led by Texas, split the trigger: a payment bond kicks in at a lower contract value than the performance bond on the identical project, because a payment bond protects subcontractors and suppliers who have no lien rights against public property — a different, and in the state's judgment more urgent, risk than protecting the government owner.
This page covers the federal Miller Act rule (40 U.S.C. § 3131), how it differs from what the FAR actually requires in practice, the states where the payment threshold diverges from the performance threshold, and what changes in cost — if anything — depending on whether you're the prime buying the bond or a subcontractor relying on one.
- Who requires it: Public owners under the federal Miller Act (40 U.S.C. § 3131) and each state's Little Miller Act.
- Amount: Once required, the payment bond equals 100% of the original contract price in most states (a few use 50%); thresholds differ, for example Texas $25,000 for non-municipal entities and $50,000 for municipalities.
- Typical cost (estimate): 0.5%-3% of the contract value, bundled into the combined premium with the performance bond. The surety sets the final price.
Texas is the sharpest example. Under Tex. Gov't Code § 2253.021, a governmental entity must require a performance bond once a public work contract exceeds $100,000 — but must require a payment bond once the same contract exceeds just $25,000 (non- municipal entities) or $50,000 (municipalities and certain transportation joint boards). Put a number on it: a $60,000 Texas municipal paving contract legally requires a payment bond but not a performance bond. The prime still has to buy one bond most people assume comes bundled with the other — and if they skip it because they assumed the $100,000 performance threshold applied to both, they're out of compliance.
The reasoning is straightforward once you separate what each bond protects. A performance bond protects the government agency that signed the contract — an entity with retainage, termination rights, and its own legal staff to manage a contractor default. A payment bond protects subcontractors and material suppliers who have no contract with the government at all and, because mechanic's liens cannot attach to public property, no fallback security if the prime doesn't pay them. Legislatures that split the threshold, like Texas, are making a judgment that the third-party protection matters at a lower dollar figure than the protection running to a government agency that can protect itself.
Most states don't split the trigger — California's Cal. Civ. Code § 9550 sets one $25,000 threshold that triggers both bonds simultaneously, and that's the more common pattern nationally. The practical lesson: don't assume your state works like the last state you bid work in. Check the payment bond threshold specifically — not just "the bond threshold" — before you bid a contract in the $25,000-$150,000 range.
Payment bond thresholds and penal-sum percentages by state
Verified Aug 2026Payment Bond Trigger and Penal Sum by State (Public Works)
Contract value above which a payment bond is legally required, and what percentage of the contract the bond must cover
| State | Payment Bond Threshold | Bond % of Contract | Statute |
|---|---|---|---|
| California | $25,000 | 100% | Cal. Civ. Code § 9550 |
| Texas | $25,000 (non-muni) / $50,000 (muni) | 100% | Tex. Gov't Code § 2253.021 |
| Florida | $200,000 (local); no bond required for state contracts ≤ $100,000 | 100% | Fla. Stat. § 255.05 |
| Alabama | $100,000 (raised from $50,000, eff. 9/1/2023) | 50% | Ala. Code § 39-1-1 |
| Colorado | $50,000 | 50% (min) | C.R.S. §§ 38-26-105, -106 |
| Massachusetts | $25,000 (uniform — state and municipal) | 50% (min) | M.G.L. c. 149, § 29 |
| Georgia | $100,000 (state contracts, unchanged) | 100% | O.C.G.A. § 13-10-40 |
| New York | $100,000 (floor) | 100% | N.Y. State Fin. Law § 137 |
| Virginia | $500,000 ($350,000 transportation) | 100% | Va. Code § 2.2-4337 |
| North Carolina | Project > $300,000 and each prime > $50,000 | 100% | N.C.G.S. § 44A-26 |
| Illinois | $150,000 (drops to $50,000 on 1/1/2029; IDOT/ISTHA $500,000) | 100% | 30 ILCS 550/1 |
| Arizona | No statutory minimum (applies to covered public works generally) | 100% | A.R.S. § 34-222 |
| Washington | $35,000 | 100% | RCW § 39.08.010 |
| Nebraska | $15,000 (state) / $10,000 (local) | 100% | Neb. Rev. Stat. § 52-118 |
Thresholds shown are for the general public-works Little Miller Act statute in each state; specialized procurement (state DOT, school construction, local government) may set different figures. Georgia's local-government threshold was separately raised to $250,000 effective 7/1/2025 under O.C.G.A. § 36-91-22 (HB 137) — the state-contract threshold in § 13-10-40 shown here did not change. Florida's $200,000 figure applies to county/city/political-subdivision contracts, which the awarding official may exempt from bonding down to that level; state-agency contracts of $100,000 or less require no bond at all. Colorado's threshold is set by § 38-26-105; the 50% penal-sum minimum is set by the companion section § 38-26-106. Arizona's public-works bond statute, A.R.S. § 34-222, does not itself state a minimum dollar threshold. Nebraska sits at the low end of the national range at $10,000-$15,000. Federal Miller Act threshold is $150,000 in FAR practice against a $100,000 statutory floor in 40 U.S.C. § 3131 — see the federal section below.
Verified against state legislative .gov sites and U.S. Code / FAR sources, August 2026.
The Miller Act statute itself, 40 U.S.C. § 3131(b), requires a payment bond on any federal construction contract of more than $100,000. That's the codified statutory floor. But the Federal Acquisition Regulation, which is what contracting officers actually apply when structuring a solicitation, sets the practical bonding threshold at $150,000 under FAR 28.102-1 — for contracts between $35,000 and $150,000, the officer instead selects from alternative payment protections (irrevocable letters of credit, tripartite escrow agreements, certificates of deposit) rather than mandating a payment bond outright. The two numbers don't contradict each other: $100,000 is what Congress wrote as the outer statutory boundary within which the government may require a bond; $150,000 is where the FAR chose to actually draw the mandatory line in current federal contracting practice. If you're bidding a federal construction contract, $150,000 is the number that determines whether you need a payment bond today.
Once the bond is required, the payment bond amount equals 100% of the original contract price — the same 100% rule that governs the paired performance bond. Both bonds are typically issued by the same surety on the combined Standard Form 25/25A pair and priced together, so a payment bond does not carry a separate line-item premium on a federal job. For the notice deadlines and claimant-tier mechanics that govern who can actually collect on a federal payment bond, see the payment bonds hub.
Payment Bond Premium by Credit Tier
Based on a $1,000,000 contract value bond amount
- Excellent (750+)Rate: 0.5% – 1.5%$5,000 – $15,000 / yr
- Good (700–749)Rate: 1.0% – 2.0%$10,000 – $20,000 / yr
- Fair (650–699)Rate: 2.0% – 3.0%$20,000 – $30,000 / yr
- Challenged (<650)Rate: 3.0% – 5.0%+$30,000 – $50,000+ / yr
Rates shown are for the combined performance-and-payment premium — payment bonds are not priced as a separate line item when issued alongside a performance bond, which is the standard structure on public works. In the minority of states with a 50% payment-bond penal sum (Alabama, Colorado, Massachusetts minimum), the payment-side exposure the surety prices is lower, which can pull the blended rate toward the lower end of these bands.
If you're the prime contractor, the payment bond cost is a real, quotable number: 0.5%-3% of contract value, bundled into the combined premium, priced off your credit and financial statements the same way the performance bond is priced. Padding your bid to cover it is standard practice — the bond isn't an unexpected cost, it's a known line item you quote before you bid.
If you're a subcontractor or supplier, you never see a premium — you don't buy the bond and it isn't priced against your credit. What determines your outcome instead is claimant tier: under the Miller Act (40 U.S.C. § 3133), first-tier subs (direct contract with the prime) can sue on the bond without any preliminary notice, while second- tier subs (contracted with a first-tier sub) must serve written notice on the prime within 90 days of last furnishing labor or material — miss that window and the claim is gone regardless of how valid it is. The "cost" that matters to a sub isn't a premium, it's the administrative discipline of tracking the notice deadline from day one of the job.
The practical overlap: a sub evaluating whether to take a job worth pursuing should ask the prime for a copy of the payment bond before starting work — federal rules entitle anyone who furnished labor or material and hasn't been paid to request a certified copy from the contracting agency. Confirming the bond exists, and confirming which claimant tier you occupy, costs nothing and takes a phone call. Skipping that step is the single most common reason subs discover — too late — that no bond was ever purchased on a contract that should have required one.
Three payment bond premiums, three different procurement paths
Same $50,000 project cost across three procurement types, all above their respective thresholds. What changes is whether a payment bond is required at all — and if so, at what percentage.
Texas municipal, $60,000
$900/yr
Above the $50,000 municipal payment threshold but below the $100,000 performance threshold under Tex. Gov't Code § 2253.021 — a payment bond is required, a performance bond is not. Bond face = 100% of contract = $60,000. Standard credit at a 1.5% rate = $900/yr.
Alabama state contract, $150,000
$1,125/yr
Above Alabama's $100,000 threshold (Ala. Code § 39-1-1), but the payment bond penal sum is only 50% of contract value under state law — bond face = $75,000, not $150,000. 700+ FICO at a 1.5% rate on the $75,000 face = $1,125/yr, roughly half what the same contract would cost in a 100%-penal-sum state.
Federal contract, $2,000,000
$20,000/yr
Above the $150,000 FAR practical trigger (40 U.S.C. § 3131 statutory floor: $100,000). Payment bond face = 100% of contract = $2,000,000, issued paired with the performance bond on Standard Form 25/25A. Combined 700+ FICO rate of 1.0% on the payment side = $20,000/yr — no separate line-item charge beyond the combined premium.
Rate bands reflect public carrier filings with state insurance departments. Final rate is set by the underwriting Treasury-listed surety at bind. Statutes verified August 2026 against the cited .gov source.
Official Federal Requirements
"A payment bond with a surety satisfactory to the officer for the protection of all persons supplying labor and material in carrying out the work provided for in the contract for the use of each person."Miller Act — 40 U.S.C. § 3131(b)(2) • 40 U.S.C. § 3131(b)(2)
All content is researched from official state and federal sources (.gov). BuySuretyBonds.com works with Treasury-listed surety carriers.
Why is Texas's payment bond threshold ($25,000) lower than its performance bond threshold ($100,000)?
Texas is the clearest example of a state that splits the two triggers in the same statute. Tex. Gov't Code § 2253.021 requires a performance bond only above $100,000, but requires a payment bond above just $25,000 for non-municipal public entities ($50,000 for municipalities). The legislature set the payment threshold lower because payment bonds protect third parties — subcontractors and suppliers with no contract with the government owner and no lien rights against public property — while the performance bond protects only the contracting agency itself, which has more tools (retainage, termination for default) to manage risk on smaller jobs. Most states use one combined threshold for both bonds; Texas is a deliberate exception.
Does my payment bond cost more if I'm a subcontractor instead of the prime contractor?
Subcontractors don't purchase the payment bond and aren't charged a premium for it — the prime contractor buys the bond and the cost is baked into their bid. What changes for a sub is exposure to notice deadlines, not price. Under the Miller Act (40 U.S.C. § 3133), a first-tier sub (contracted directly with the prime) can sue on the bond without giving preliminary notice, while a second-tier sub (contracted with a first-tier sub) must serve written notice on the prime within 90 days of last furnishing labor or material or loses the claim entirely. If you're a sub or supplier evaluating a project, the question that actually affects your economics is which tier you're in, not what the prime paid for the bond.
What happens to my payment bond premium if my state's threshold changes mid-contract?
State Little Miller Act thresholds move — Georgia raised its local-government bonding trigger from $100,000 to $250,000 effective July 1, 2025 under O.C.G.A. § 36-91-22 (HB 137), while its state-contract threshold in § 13-10-40 stayed at $100,000, and Alabama raised its threshold from $50,000 to $100,000 effective September 1, 2023 (Ala. Code § 39-1-1). If your contract was signed before an effective date, the threshold in force on the contract date typically governs — a bond purchased under the old rule is not retroactively voided by a later statutory increase. The risk runs the other direction: a change order that pushes a contract from below to above the current threshold can trigger a bond requirement mid-project, and carriers commonly price that retroactive bond at a shortened term, which raises the effective annualized cost. Confirm the threshold in effect on your contract execution date, not the current one, before assuming you are exempt.
Is the federal payment bond threshold $100,000 or $150,000?
Both figures are correct for different reasons, which is a common source of confusion. The Miller Act statute itself, 40 U.S.C. § 3131(b), sets the bonding requirement at contracts "of more than $100,000." The Federal Acquisition Regulation, which implements the statute for federal construction procurement, sets the practical bonding trigger at $150,000 (FAR 28.102-1) — between $35,000 and $150,000, the contracting officer instead selects from alternative payment protections such as an irrevocable letter of credit. In practice, $150,000 is the number that determines whether your federal construction contract requires a payment bond; $100,000 is the statutory floor Congress wrote and remains relevant to how courts read the underlying protection.
Can I get a payment bond without a performance bond?
Rarely, and generally not on public projects above the statutory threshold — both bonds are required together under the Miller Act and every state's Little Miller Act once a contract crosses the trigger amount. A narrow exception exists in the federal $35,000-$150,000 range, where a contracting officer can select a standalone payment bond as one of several allowed payment-protection alternatives without requiring a performance bond. On private commercial work, a project owner or lender can require a payment-bond-only arrangement by contract even though nothing compels it, most often to protect against mechanic's liens in states like Florida and Arizona where a recorded payment bond can extinguish lien rights against the property.
Before pricing, confirm you actually need one: the payment bond requirements guide walks through the threshold test (does your contract trigger the requirement), the penal-sum test (how much coverage), and the claimant-tier test (who can actually file) for federal, Texas, and California projects.
For the full mechanics of who can claim on a payment bond, the notice deadlines by claimant tier, and the private-project AIA A312 form, see the payment bonds hub page. If you're the subcontractor or supplier actually filing the claim, the how-to-file guide covers the exact notice deadlines and required claim letter contents for federal, Texas, and California projects. Since payment and performance bonds are almost always priced together, the performance bond cost by state guide covers the FAR 28.102 penal-sum rules and a 24-state performance-specific threshold table that complements the payment-specific table above. For the complete 51-jurisdiction combined-threshold reference (both bonds, one number, for every state that doesn't split the trigger), see the Little Miller Act state thresholds guide. For the combined dual-bond purchase flow, performance and payment bonds covers how the two bonds are typically issued as a pair.
For pricing context across all surety lines, the surety bond cost guide covers contractor, license, court, and probate bond rate structures. To request a quote directly, submit the payment bond quote form — same producer team, same Treasury-listed carriers, same pricing shown above.
Bidding a contract near your state's threshold? Get the exact number in writing.
Thresholds move, statutes get amended, and "the bond threshold" means two different numbers in states like Texas. The producer team writes Miller Act and state LMA payment bonds nationally with Treasury-listed carriers and will confirm your exact requirement before you finalize a bid.
Treasury Circular 570 carriers · YMYL disclaimer: this page describes pricing for surety bonds, which are regulated insurance products. Premiums are illustrative; binding rate is set by the carrier at underwriting.
Federal Miller Act, FAR implementing rules, and state Little Miller Act statutory citations were verified against primary .gov sources during August 2026 research:
- Miller Act (40 U.S.C. § 3131) — law.cornell.edu/uscode/text/40/3131
- Miller Act notice requirements (40 U.S.C. § 3133) — law.cornell.edu/uscode/text/40/3133
- Texas Government Code § 2253.021 (Performance and Payment Bonds Required) — statutes.capitol.texas.gov — GV § 2253.021
- California Civil Code § 9550 (LMA payment bond, $25,000 trigger) — leginfo.legislature.ca.gov — CIV § 9550
- Florida Statutes § 255.05 (Public works payment and performance bond) — leg.state.fl.us — § 255.05
Premium ranges reflect public carrier filings with state insurance departments observed during August 2026 and are not guaranteed. Actual premium is set by the underwriting Treasury-listed surety at time of application. This page is informational and does not constitute legal or financial advice; verify current requirements with your contracting officer or state procurement authority before relying on any figure for a federal or state filing.
Prime buying the bond, or a sub checking one exists — either way, start here
Payment bond premium is a percentage of the bond's penal sum — 0.5%-3% of contract value on standard credit, bundled with the performance bond into a single combined rate. Tell us your contract value, your role, and your project state and a Treasury-listed carrier will respond with a firm number.
Compare rate tiers on the payment bonds hub, or review cost drivers across all surety lines on the surety bond cost guide.