Performance &Payment Bonds
Your contractor license bond makes you legal to operate. A performance and payment bond is what actually wins you the public job. Both are issued together for one premium, and the qualifying line is your bonding capacity—not your credit alone.
Get Your P&P Bond Quote
One premium covers both bonds
Performance Bond vs. Payment Bond
Both bonds issued together for a single premium
| Feature | Performance Bond | Payment Bond |
|---|---|---|
| Protects | Project owner (obligee) | Subs, suppliers & laborers |
| Guarantees | Project completion per the contract | Everyone downstream gets paid |
| Triggered By | Contractor default or abandonment | Contractor fails to pay a sub |
| Penal Sum | Amount the obligee considers adequate (usually 100%) | 100% of the total payable |
| Miller Act | Required over $150K | Required over $150K |
| Who Files the Claim | The owner | An unpaid sub or supplier |
| Separate Premium? | No — one premium covers both | No — one premium covers both |
Federal contracts over $150,000 require both bonds under the Miller Act (40 U.S.C. §§ 3131–3134). The payment bond penal sum equals the total payable under § 3131(b); the performance bond is set in an amount the contracting officer considers adequate.
Want the standalone breakdown? Read up on the performance bond half or the payment bond half separately.
The License Bond Got You Legal. The P&P Bond Gets You the Job.
These are two completely different products that contractors constantly conflate. A contractor license bond is a small, fixed credit-based bond—a few hundred dollars a year—that a state licensing board makes you carry to operate legally. It protects the public, not the owner of any one project, and it's underwritten almost entirely on your personal credit score. Get a $25,000 CSLB bond in California, post the fixed amount your state sets in Texas or Florida, and you can pull permits and run jobs.
A performance and payment bond is a project bond. Its penal sum equals the contract value—a $2M job carries a $2M performance bond and a $2M payment bond—and it's underwritten on the strength of your financial statements, not just your FICO. The surety is effectively pre-qualifying you to deliver the work. That is why a contractor with perfect credit can still be declined: the question isn't "will you pay us back," it's "can your balance sheet and work-on-hand absorb a $2M obligation if the job goes sideways."
Together, the two bonds answer both halves of an owner's risk: the performance bond guarantees the job gets finished to spec, and the payment bond guarantees the subs and suppliers underneath you get paid so they can't lien the project. Because public property can't be liened, the payment bond is the only recourse downstream parties have—which is exactly why every Miller Act and Little Miller Act in the country pairs them.
Performance Bond
Answers: will the job get done?If you walk off or default, the surety steps in—finishing the work, re-letting it, or paying the owner's excess completion cost up to the penal sum.
How performance bonds workPayment Bond
Answers: did everyone get paid?Unpaid subs, suppliers, and laborers file directly against this bond—their substitute for the mechanic's lien they can't place on public property.
How payment bonds workWhat the Surety Reads on Your Financial Statement
Contract-bond underwriting is the "three C's"—capital, capacity, and character. Where a license bond stops at a credit pull, a P&P submission gets read like a loan file. The line items that move a decision:
Working capital
Current assets minus current liabilities. A common rule of thumb: a surety wants working capital around 10% of your single-job limit and 5% of aggregate.
Net worth & equity
Retained earnings and owner equity signal staying power. Negative equity or heavy owner draws cap the program fast.
Work-on-hand (backlog)
Open contract value still to be completed. This is what eats your aggregate limit—every job you win reduces capacity for the next one.
Profit fade & WIP schedule
A work-in-progress schedule showing jobs losing margin as they near completion is the single fastest way to shrink a bonding line.
Bank line & cash
An open, unused line of credit tells the surety you can fund payroll through a slow-pay owner without dipping into the bond.
CPA quality
Reviewed or audited statements unlock larger limits than internally-prepared or tax-basis numbers. Above roughly $1M single-job, expect a CPA review to be required.
The output of this review is two numbers: your single-job limit (the largest contract you can bond) and your aggregate limit (the total open bonded work you can carry at once). Estimate yours with the bonding capacity calculator, then price the premium with the combined P&P bond calculator. Newer or credit-challenged shops can often still get bonded through the contract bond programs backed by the SBA Bond Guarantee.
P&P Bond Pricing
One premium for both bonds - rates vary by credit and contract size
Best Value in Construction Bonding
Pay one premium and get both performance AND payment bonds. No separate charges. See full cost breakdown.
The Miller Act and the Tiers Below It
The federal rule isn't a single line in the sand—there are three tiers. Our Miller Act guide walks each one.
Federal Construction (40 U.S.C. §§ 3131–3134)
Full performance and payment bonds are mandatory. The $150K figure is the simplified acquisition threshold administered through FAR 28.102.
No bond required, but the contracting officer must select two or more alternative payment protections (often an irrevocable letter of credit).
No payment-protection requirement under the statute.
Penal sums: the payment bond equals the total amount payable under the contract (§ 3131(b)); the performance bond is set in an amount the contracting officer considers adequate—in practice 100% of the contract. See the full government-contract bonding process.
State "Little Miller Acts" Vary by Bond
Most states adopted their own version for state and local work—but the payment-bond trigger is often lower than the performance-bond trigger. Texas is the textbook case.
| State | Statute | Payment Bond | Performance Bond |
|---|---|---|---|
| California | Civ. Code § 9550 | > $25,000 | > $25,000 |
| Texas | Gov. Code § 2253.021 | > $25,000 | > $100,000 |
| Florida | Fla. Stat. § 255.05 | > $200,000 | > $200,000 |
| Washington | RCW 39.08 | All public work | All public work |
| Colorado | C.R.S. § 38-26-106 | All public work | All public work |
- California: Payment bond 100%; performance bond set by entity
- Texas: Two separate triggers — payment kicks in far earlier
- Florida: Below the cap, alternative payment protection is allowed
- Washington: Bond required regardless of size (retainage substitute under $150K)
- Colorado: Penal sum set at no less than 50% of the contract price
Bidding state work specifically? See the requirements for a California performance bond, the Texas Chapter 2253 bond, or a Florida §255.05 bond. And before you can bid that public job, the same state usually makes you carry a license bond first—whether that's Washington L&I contractor requirements, a Virginia Class A/B/C contractor bond, or a Nevada contractor license bond.
Almost every state still makes you hold a contractor license bond just to bid—so a public job typically stacks a bid bond, the license bond, and the P&P bond. See how they fit together in our construction bonds overview.
How Fast You Can Get Bonded
Turnaround scales with how much underwriting the contract size demands. Small contracts run on a streamlined application; large ones need the full financial package.
Have a bid deadline?
Send the contract details and we'll size the bond and quote the premium.
Performance & Payment Bond FAQs
The questions GCs and MEP subs actually ask before bidding
Why do I need both a performance bond and a payment bond?
Is the Miller Act threshold $150,000 or $100,000?
What is the difference between my single-job limit and my aggregate limit?
How is a P&P bond different from my contractor license bond?
Why would a surety decline a P&P bond if my credit is good?
Do performance and payment bonds cost twice as much because they are two bonds?
Related Bond Types
Complete your construction bonding package
Bid Bonds
Required to submit competitive bids - often free with P&P bonds
Performance Bonds
Standalone performance bond information
Payment Bonds
Standalone payment bond information
Contract Bonds
All construction bonding types explained
From License to Project, State by State
You typically need the license bond to bid and the project bond to win. Here is each step of that path in the three states with the most public construction work. The same license-then-project sequence applies wherever you operate—contractors bidding public work in the Northeast and Midwest start with New York contractor license bonds, an Ohio contractor license bond, or Pennsylvania HICPA registration before the P&P bond ever comes into play.
California
- $25,000 CSLB license bond — bid eligibility
- California performance bond — Civ. Code § 9550
Texas
- Texas contractor license bond — municipal-level
- Texas Chapter 2253 bond — $25K pay / $100K perf
Florida
- Florida contractor license bond — credit-driven
- Florida §255.05 performance bond — over $200K
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.
You're Licensed. Now Go Win the Job.
Send us the contract value and we'll size the performance and payment bond, run the financial-statement review, and quote a single premium for both. You never pay until the bonds are issued and in your hands.