Performance and PaymentBonds (P&P Bonds)
Performance and payment bonds (often called a P&P bond) address different project obligations: contract performance and payment to eligible subcontractors and suppliers. They are distinct from a contractor license bond. Request a review of your project requirements and bonding capacity; pricing, terms and approval depend on carrier underwriting.
Request Performance & Payment Bonds
One request covers both bonds. No payment to start.
What helps your agent quote
- Contract amount and your bid or award date
- Project owner (obligee) and the required bond form, if you have it
- Your company’s legal name and the project state
- For larger contracts, the carrier may ask for financial statements and a work-in-progress schedule
You can start without every document. No payment is needed to request a quote.
What helps your agent quote
- Contract amount and your bid or award date
- Project owner (obligee) and the required bond form, if you have it
- Your company’s legal name and the project state
- For larger contracts, the carrier may ask for financial statements and a work-in-progress schedule
You can start without every document. No payment is needed to request a quote.
- Who requires it: the project owner. Federal construction contracts over $150,000 require both bonds (Miller Act, FAR 28.102); many states set similar rules for public work.
- Amount: the payment bond equals the total payable under the contract; the performance bond is set at an amount the owner considers adequate, in practice 100%.
- Typical cost (estimate): roughly 0.5%–3%+ of the contract amount, depending on credit and financials; the carrier sets the final price.
- Underwriting: financial statements, working capital and bonding capacity. Share your bid or award deadline up front.
Payment Performance Bond: Performance vs. Payment Bond
Two bonds that are often quoted together; confirm premium and fees in your quote
| 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? | May be priced together; confirm quote | May be priced together; confirm quote |
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.
What Is a P&P Bond? How It Differs From a License Bond
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.
Performance and Payment Bond Cost
Rates below are industry estimates. Ask about combined pricing; terms depend on carrier underwriting.
Best Value in Construction Bonding
Performance and payment bonds may be priced together. Review the quoted premium and any fees before purchasing. Learn about cost factors.
Performance and Payment Bond Requirements: 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 Payment and Performance Bond Requirements (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.
Official Federal Requirements
"A performance bond with a surety satisfactory to the officer awarding the contract, and in an amount the officer considers adequate, for the protection of the Government... 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. The amount of the payment bond shall equal the total amount payable by the terms of the contract unless the officer awarding the contract determines, in a writing supported by specific findings, that a payment bond in that amount is impractical..."Miller Act, U.S. Code Title 40 • 40 U.S.C. § 3131(b)
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.
The full Texas rules are in our Texas Government Code 2253 guide; for every state's trigger, see the performance bond requirements guide.
| State | Statute | Payment Bond | Performance Bond |
|---|---|---|---|
| California | Civ. Code § 9550; PCC § 7103 | > $25,000 generally | Check awarding entity |
| Texas | Gov. Code § 2253.021 | > $25,000 / > $50,000 | > $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: State entities governed separately by PCC §7103; payment bond at least 100%
- Texas: $50,000 payment trigger for municipalities and qualifying joint boards; $25,000 generally otherwise
- 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.
What Sets Your Bonding Timeline
Turnaround depends on how much underwriting the contract size demands and how quickly the file is complete. Smaller contracts usually need a shorter application; larger ones need the full financial package. Timing is set by the carrier, so share your deadline with the request.
Have a bid deadline?
Send the contract details and bid date. An agent reviews the bond requirements and carrier options with you.
Contracting in California, Texas or Florida?
California
California contractors need a $25,000 CSLB license bond (Bus. & Prof. Code 7071.6) before the license issues. Public jobs add performance and payment bonds on top.
Texas
Texas has no statewide contractor license bond, but public works contracts over the statutory threshold require performance and payment bonds under Gov. Code Chapter 2253.
Florida
Florida's DBPR contractor license bond ($10,000 to $20,000) applies mainly to applicants with a credit score below 660, so many contractors need none. Public projects require performance and payment bonds under F.S. 255.05.
Every contract bond starts with a license bond
Most states require a contractor license bond before you can bid. Fast-growing construction markets:
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?
Who needs a performance and payment bond?
How do I get a performance and payment bond?
What happens after I apply?
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). BuySuretyBonds.com works with Treasury-listed surety carriers.
You're Licensed. Now Go Win the Job.
Send us the contract value and the required bond forms. An agent reviews both bond requirements, explains what the carrier needs to underwrite them and walks you through the offered premium and terms. There is no charge to request a quote.