Types of Construction Bonds: Bid, Performance, Payment & More
Construction projects use a family of surety bonds, each guaranteeing a different obligation at a different stage. This guide breaks down every type — bid, performance, payment, combined P&P, maintenance, subdivision, and supply bonds — explaining what each guarantees, who requires it, when it applies, and what it typically costs.
Sourced from the Miller Act (40 U.S.C. §§ 3131–3133) and the Federal Acquisition Regulation (FAR Part 28).
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This page covers each bond type in depth. If you want the big picture first, start with our complete construction bonds guide, then come back here to drill into the specific bond your contract requires.
People search “types of construction bonds” and end up mixing two very different categories. The bonds on this page — bid, performance, payment, maintenance, subdivision, and supply — are contract surety bonds. Each is tied to a single project and a single owner (the obligee), and each guarantees a specific obligation in that contract. They appear and disappear with the job.
That is different from a contractor license bond, which a state or municipality requires before issuing your contractor's license. A license bond is not project-specific — it stays in force year after year and guarantees you follow the licensing statute. If you want the full side-by-side, our explainer on the difference between a contractor bond and a construction bond walks through exactly when you need each. Most contractors need a license bond to operate and contract bonds to win bonded work.
Contract bonds (this guide)
- • Tied to one project and one owner
- • Guarantee a contract obligation
- • Bid, performance, payment, maintenance, subdivision, supply
- • Premium based on contract size and credit
License / permit bonds
- • Required to hold a license or permit
- • Guarantee compliance with a statute
- • Renew annually, not per project
- • Covered separately under license bonds
Construction Bond Types at a Glance
Where each bond falls in the project lifecycle, what it guarantees, and the typical penal amount
| Bond | When in the project | What it guarantees | Typical amount |
|---|---|---|---|
| Bid bond | During bidding | You will honor your bid and post the project bonds if awarded | Federal: ≥ 20% of bid, max $3M |
| Performance bond | At award through completion | You complete the work per the contract | 100% of contract price |
| Payment bond | At award through completion | Subs and suppliers get paid | 100% of contract price |
| Combined P&P bond | At award (federal standard) | Both completion and payment | 100% each |
| Maintenance / warranty bond | After completion, 1–2 yrs | No defects during the warranty period | Often 10–100% of contract |
| Subdivision bond | During developer site work | Public improvements are built to plan | Set by the municipality |
| Supply bond | During delivery | Materials / equipment are delivered as ordered | 100% of the supply contract |
Bid guarantee and 100% performance/payment amounts follow FAR 28.101-1 and FAR 52.228-15. Maintenance, subdivision, and supply amounts are set by the owner or municipality and vary.
Sources: 40 U.S.C. § 3131; FAR 28.101-1, 28.102-1, 52.228-15.
1. Bid Bond
A bid bond is submitted with your proposal on a competitively bid project. It guarantees two things: that the price you bid is genuine, and that if you are the low bidder you will actually sign the contract and post the required performance and payment bonds. If you win and then walk away, the surety pays the owner the cost of moving to the next bidder — typically the gap between your bid and the runner-up — up to the bond's penal amount.
What it guarantees
The bidder will enter the contract at the bid price and furnish the project bonds. It does not guarantee project completion.
Who requires it & when
Public owners on competitive solicitations, and many private owners. Required during the bidding phase; it expires once the contract is signed and the project bonds are posted.
Typical amount
On federal procurements a bid guarantee must be at least 20% of the bid price, capped at $3 million, when a performance bond will be required (FAR 28.101-1). State and local owners commonly set bid bonds at 5–10% of the bid. Premium is usually $0 for prequalified contractors because the surety's exposure is only the bid spread, not the whole job.
Bid bonds are where most contractors begin a bonding relationship. For the thresholds, forms, and a state-by-state look, see our bid bond requirements guide.
2. Performance Bond
A performance bond guarantees that you will complete the project according to the contract documents. If you default — abandon the job, go insolvent, or fail to perform — the surety steps in to finish the work, finance your completion, or pay the owner's cost to complete, up to the bond amount. Because public property cannot be liened, this bond is the owner's primary protection on government work.
What it guarantees
Completion of the contracted work to specification, on the owner's behalf. The surety has remedies including takeover, tender, or financing.
Who requires it & when
Required at contract award on most public works above a statutory threshold, and on private jobs whenever the owner or lender demands it. Stays in force through final acceptance.
Typical amount & the federal rule
The U.S. standard is 100% of the contract price. On federal construction over $150,000 the Miller Act (40 U.S.C. § 3131(b)) requires a performance bond, and FAR 52.228-15 sets it at 100% of the contract, written by a surety on Treasury Circular 570. Note that the statute names $100,000 while the operative mandatory threshold is $150,000 under FAR 28.102-1.
State thresholds vary widely under each state's “Little Miller Act.” For the full state-by-state table and the federal tiers, read our performance bond requirements guide, or see how the Miller Act bond requirements work on federal jobs.
3. Payment Bond
A payment bond guarantees that the subcontractors, laborers, and material suppliers on a project get paid. On private construction those parties can file a mechanic's lien against the property if they are stiffed; on public projects you cannot lien government property, so the payment bond is their remedy. It protects everyone downstream of the prime contractor, not the owner.
What it guarantees
Payment to subcontractors and suppliers who furnish labor or materials. It is the public-work substitute for the mechanic's lien they cannot file.
Who requires it & when
Required at award alongside the performance bond on public projects above the threshold. Claimants pursue the surety, not the owner, if they go unpaid.
Typical amount & claim deadlines
Federal payment bonds are 100% of the contract price (FAR 52.228-15). Claimants face strict deadlines under 40 U.S.C. § 3133: a second-tier claimant must give the prime contractor written notice within 90 days of last furnishing labor or materials, and any claimant must file suit within one year of that date. Miss those windows and the bond claim is barred.
Because performance and payment obligations almost always travel together, owners typically require them as a pair — which is the next bond type below.
4. Combined Performance & Payment Bond
On most public construction the performance and payment bonds are not bought separately — they are written as a combined performance and payment bond package, underwritten in one decision and charged as a single premium. This is the default arrangement on federal jobs: the Miller Act mandates both, each at 100% of the contract, on contracts exceeding the threshold.
Why they pair up
The two bonds protect different parties — the owner (performance) and the supply chain (payment) — but they share the same underwriting: your credit, financials, and capacity. Issuing them together avoids duplicate paperwork and gives the contractor one premium covering both. On a federal contract over $150,000, expect both bonds at 100% each as a matter of course.
Whether your bonds are separate or combined, the cost is driven by the same factors. Our construction bond cost guide breaks down premiums by contract size and credit tier, and you can run a quick number through the construction bond calculator.
5. Maintenance & Warranty Bond
A maintenance bond (sometimes called a warranty bond) picks up where the performance bond leaves off. It guarantees that the completed work is free of defects in workmanship and materials for a defined warranty period after substantial completion — commonly one to two years. If a latent defect surfaces during that window, the bond covers the cost to repair it.
What it guarantees
That defects appearing during the warranty period are corrected. Some performance bonds fold in a short maintenance term; longer or standalone coverage is bonded separately.
Who requires it & when
Public and private owners who want protection past acceptance. It begins at completion and runs for the stated warranty period.
The terms “maintenance bond” and “warranty bond” are often used interchangeably, but the scope can differ. Our explainer on the difference between a maintenance bond and a warranty bond sorts out which one your contract actually calls for.
6. Subdivision & Site-Improvement Bond
A subdivision bond — also called a site-improvement, plat, or development bond — is unusual among construction bonds because the owner and the obligee are not the same kind of party. Here a land developer guarantees to the municipality that the public improvements that come with a new subdivision (roads, curbs, sidewalks, storm drains, water and sewer lines) will be built to the approved plans, even though the developer owns the project.
What it guarantees
That the developer completes the required public infrastructure to municipal standards. If they do not, the city can call the bond to finish the work.
Who requires it & when
The city or county, as a condition of plat or development approval. It runs while the developer builds out the improvements.
Penal amounts are set by the municipality, usually tied to its engineer's estimate of the improvement cost. Learn more on the subdivision bonds page.
7. Supply Bond
A supply bond guarantees that a vendor will deliver the materials or equipment specified in a supply contract — on time, to spec, and at the agreed price. It is the right bond when the obligation is to furnish goods (pipe, aggregate, steel, fixtures, equipment) rather than to perform construction. If the supplier fails to deliver, the surety covers the buyer's cost to source the materials elsewhere.
What it guarantees
Delivery of the contracted materials or equipment per the purchase agreement. It does not cover installation or construction labor.
Who requires it & when
Public and large private buyers on material supply contracts. It runs for the term of the delivery obligation.
Supply bonds are typically 100% of the supply contract value. See the supply bonds page for forms and pricing.
Also worth knowing: the completion bond
A completion bond is closely related to a performance bond but is usually demanded by a project's lender rather than its owner. It guarantees the project will be finished free of liens and within budget so the lender's collateral is protected, and it can obligate the surety to complete the work regardless of whether the contract price is sufficient — a broader commitment than a standard performance bond. Completion bonds are far less common than the bid/performance/payment trio and are most often seen on developer-financed or specialty projects. Because the underwriting is more demanding, contractors typically only encounter one when a construction lender writes it into the loan terms.
Which construction bond do you need?
About to bid a public job? You need a bid bond with your proposal.
Just won an award? Expect to post a performance bond and payment bond — usually combined — before you can start.
Wrapping up? Your contract may call for a maintenance bond to cover the warranty period.
Developing land? The municipality will require a subdivision bond for the public improvements.
Just supplying materials? A supply bond is the right fit.
Not sure how much you can be bonded for? Your aggregate capacity is set by your working capital and financials — see the bonding capacity guide.
Get the construction bond your contract requires
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Prefer to read first? Start with the how construction bonds work overview, then come back to apply.
Construction Bond FAQs
What are the three main types of construction bonds?
The three core contract surety bonds are the bid bond, the performance bond, and the payment bond. They follow the lifecycle of a project: the bid bond backs your proposal during procurement, the performance bond guarantees you finish the work to contract terms once awarded, and the payment bond guarantees your subcontractors and suppliers get paid. On federal construction over $150,000, the Miller Act (40 U.S.C. § 3131) requires both a performance and a payment bond together. Beyond these three, maintenance, subdivision, and supply bonds cover specific situations like post-completion defects, developer site work, and material delivery.
What is the difference between a bid bond and a performance bond?
A bid bond is a small, short-lived guarantee submitted with your proposal: if you win and then refuse to sign the contract or post the required bonds, the bid bond covers the owner's cost of re-letting the job, usually the difference between your bid and the next bidder's. On federal work the bid guarantee is at least 20% of the bid price, capped at $3 million (FAR 28.101-1). A performance bond is the much larger, longer-lasting guarantee that activates after award — it equals 100% of the contract price under FAR 52.228-15 and remains in force until the work is complete. A bid bond is typically free for prequalified contractors; a performance bond carries a premium.
Are payment and performance bonds the same thing?
No. They protect different parties and guarantee different obligations, even though they are almost always issued together on public work. A performance bond protects the project owner and guarantees the contractor completes the job per the contract. A payment bond protects subcontractors and material suppliers and guarantees they are paid — it functions as the substitute for mechanic's liens, which cannot attach to public property. The federal standard is a combined performance and payment bond, each at 100% of the contract, required on contracts over $150,000.
How much do construction bonds cost?
Bid bonds are usually free for prequalified contractors because the surety is only on the hook for the bid spread, not the whole job. Performance and payment bonds carry a premium that is an approximate industry range of 0.5% to 3% of the contract amount, driven mainly by your credit, financial statements, and track record — stronger contractors pay near the bottom of that range. Premium is charged on the contract price, not the bond penal sum, and is generally a one-time charge for the project. For a detailed breakdown by contract size and credit tier, see our construction bond cost guide.
Is a contractor license bond a construction bond?
Not in the contract-surety sense. A contractor license bond is a license/permit bond that a state or city requires before it will issue your contractor's license — it guarantees you follow the licensing statute and protects consumers, and it stays in place year to year regardless of any single project. The construction bonds on this page (bid, performance, payment, maintenance) are job-specific contract bonds tied to one project and one owner. Many contractors need both: a license bond to operate and project bonds to win bonded work.
When in a project does each construction bond apply?
They line up with the project timeline. The bid bond applies during bidding and expires once the contract is signed and project bonds are posted. The performance and payment bonds are executed at contract award and stay in force through construction and final acceptance. A maintenance or warranty bond begins at substantial completion and runs through the warranty period, typically one to two years, covering latent defects. Subdivision bonds run while a developer builds public improvements, and supply bonds run for the duration of a material or equipment delivery contract.
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.
Construction Bonds: Complete Guide
The hub overview of how construction bonds work, who needs them, and how to get bonded.
Start here →Construction Bond Cost
What performance and payment bonds actually cost by contract size and credit tier.
See pricing →Performance Bond Requirements
State-by-state Little Miller Act thresholds plus the federal rule.
Read guide →Miller Act Bond Requirements
How the federal Miller Act governs bonding on government construction.
Read guide →Bonding Capacity Guide
How sureties set your single-job and aggregate bonding limits.
Read guide →Construction Bond Calculator
Estimate your premium from the contract amount in seconds.
Run the numbers →Disclaimer: This guide is for educational purposes and does not constitute legal, financial, or bonding advice. Federal thresholds and bond amounts are drawn from the Miller Act (40 U.S.C. §§ 3131–3133) and the Federal Acquisition Regulation (FAR Part 28); state public-works requirements and private-project bond terms vary. Cited premium ranges are approximate industry estimates and depend on the contractor's credit and financials. Verify current requirements with the contracting authority and your surety before bidding or executing a contract.