Michigan Performance BondsFor Contracts Over $50,000
Michigan is one of the only states where the performance bond percentage is not a fixed national convention. Act 213 of 1963 (MCL 129.201-129.212) requires a bond on any public building or public work contract exceeding $50,000, but the amount is set by the governmental unit at whatever it chooses — as long as it is not less than 25% of the contract price. That 25% floor is dramatically lower than the 100%-of-contract convention most contractors are used to from other states, and it changes your premium math every time.
Why the Same Contract Can Cost 4x Less to Bond in Michigan
In most states with a Little Miller Act, the performance bond runs at 100% of the contract price as a matter of settled practice, even where the statute itself does not force that exact number. Michigan’s Act 213 goes the other direction: MCL 129.202 says the performance bond shall be “in an amount fixed by the governmental unit but not less than 25% of the contract amount.” The governmental unit decides where in that range to land — and the choice has nothing to do with your creditworthiness. It is purely a matter of what is printed in the bid specifications for that specific contract.
This matters because your bond premium is priced against the bond's face amount, not the full contract price. A township that sets the bond at the 25% floor is asking you to post coverage for a quarter of what a school district asking for 100% would require on an identical dollar contract — and your premium scales with it. Contractors who assume every Michigan public job needs a 100% bond either over-quote themselves out of competitive bids or, worse, under-budget when a district does require the full amount. Read the actual bid documents every time.
Michigan Performance Bond Amount
Source: MCL 129.202 — performance bond amount fixed by the governmental unit, not less than 25% of the contract amount.
Township Sets the 25% Floor
District Sets Full 100%
Illustrative math at the same 1.5% rate tier. Actual premium depends on your credit, financial statements, and the surety's underwriting of the specific project — see our performance bond cost guide.
Official Michigan Requirements
"Before any contract exceeding $50,000.00 for the construction, alteration, or repair of any public building or public work is awarded to any person, that person shall furnish to the governmental unit... a performance bond... The performance bond shall be in an amount fixed by the governmental unit but not less than 25% of the contract amount."Michigan Legislature — Act 213 of 1963 • MCL 129.201 (bond requirement, $50,000 threshold); MCL 129.202 (performance bond, 25% floor)
Who Actually Counts as a “Governmental Unit” Under Act 213
MCL 129.201 defines “governmental unit” broadly. If your obligee falls into any of the categories below and the contract exceeds $50,000, Act 213 applies — regardless of how small the entity is or how informal the procurement process looks.
One narrow carve-out: MCL 129.212 excludes contracts awarded under the Drain Code of 1956 (then Act 40 of 1956, now recodified) from Act 213. If you are bidding a county drain project, confirm with the drain commissioner's office whether Act 213 or a different bonding requirement governs — do not assume.
MDOT Adds a Prequalification Gate the Bond Doesn't Cover
When the governmental unit is the State of Michigan acting through MDOT, the Act 213 bond requirement is the same as anywhere else — but MDOT layers a separate procurement rule on top that trips up contractors used to bidding for counties or townships. Unless a project is specifically flagged “prequalification waived,” you must be prequalified with MDOT in the applicable work classification before you can bid as a prime contractor at all. The bond does not substitute for this — you can have full bonding capacity and still be ineligible to bid if your prequalification paperwork isn't current.
Subcontractors face a lighter version of the same rule: you must be prequalified in the work classification you intend to perform, but you do not file Forms 1300EZ or 1381 yourself — the prime contractor's bid package handles that. Line up your prequalification well before the bid letting date; MDOT will not waive the Form 1381 deadline for a contractor who is otherwise bonding-ready.
MDOT Bid Eligibility Checklist
- Form 1300EZ filed within the posted filing period for the current letting schedule
- Form 1381 (Request for Eligibility to Bid) due 5:00 p.m. one day before the bid letting
- Prequalified in the correct work class shown on the project advertisement
- Act 213 performance + payment bond ready at whatever % MDOT sets for that letting
The Payment Bond Runs on the Same 25% Floor (MCL 129.203)
Act 213 does not stop at the performance bond. MCL 129.203 requires a companion payment bond, also “fixed by the governmental unit but not less than 25% of the contract amount,” protecting subcontractors and material suppliers who go unpaid rather than protecting the governmental unit's completion interest. In practice, Michigan governmental units almost always set the performance bond and payment bond at the same percentage in a given contract — but nothing in the statute requires them to match, so confirm both figures separately in your bid documents rather than assuming parity.
When a subcontractor or supplier goes unpaid, MCL 129.207 governs the claim. A claimant with no direct contract with the principal contractor must serve written notice on the principal contractor within 30 days of first furnishing labor or material, then written notice to both the principal contractor and the governmental unit within 90 days of the last labor or material furnished. Once 90 days pass unpaid, the claimant may sue on the bond for the unpaid balance. MCL 129.209 then caps enforcement at one year from the date final payment was made to the principal contractor. Package both bonds together and both deadlines land on your calendar the same day the contract is signed. For the mechanics of pairing the two, see our performance and payment bond overview, or the dedicated payment bond page for claim mechanics on federal Miller Act work.
Three Real Michigan Contract Types, Three Different Bonds
The same $600,000 contract price produces three very different bond amounts depending on which governmental unit is awarding the work and what percentage it wrote into the bid documents.
Illustrative Bond Amounts by Obligee Type
Same $600,000 contract price, different bid-document percentages
| Project Type | Typical % Requested | Bond Amount | Governing Statute |
|---|---|---|---|
| School district building renovation (bond-issue funded) | ~100% | $600,000 | MCL 129.202 (district-set) |
| County building or facilities contract | ~50% | $300,000 | MCL 129.202 (county-set) |
| Township road or utility contract | 25% (statutory floor) | $150,000 | MCL 129.202 (floor) |
Percentages shown are illustrative patterns we see across Michigan public contracts, not a statutory schedule. Act 213 sets only a 25% floor — every governmental unit picks its own number per contract. Always confirm the exact percentage in your specific bid documents.
Source: MCL 129.202 (performance bond, 25% statutory floor set by the governmental unit)
Working a formally bid project? You'll typically need a bid bond at tender before the performance and payment bonds are due at award — see how the two connect in our bid bond vs. performance bond guide. Not sure what your premium will run? Try the performance bond calculator or the broader construction bond calculator.
Michigan Performance Bond Questions
Specific to Act 213, the 25% floor, and Michigan claims procedure
Our bid documents say the performance bond is only 25% of the contract — is that actually legal, or did the agency make a mistake?
It is legal, and it is not a mistake. Michigan's Act 213 (MCL 129.202) sets the performance bond amount at whatever the governmental unit fixes in the contract, "but not less than 25% of the contract amount." Twenty-five percent is a statutory floor, not a fixed rate — the awarding agency can require more, and plenty do, but nothing in Michigan law forces them above that floor. This surprises contractors who have worked in states where the performance bond is conventionally set at 100% of contract price by policy or practice. In Michigan, read the actual bid documents: the percentage is whatever the governmental unit wrote down, and it varies contract to contract, even within the same agency.
We were awarded a $48,000 township resurfacing contract — do we need an Act 213 bond?
No. MCL 129.201 applies to contracts "exceeding $50,000.00" for construction, alteration, or repair of a public building or public work. A $48,000 contract falls under the threshold, so the governmental unit is not statutorily required to demand a performance or payment bond under Act 213. Some agencies still request one voluntarily on smaller jobs, and you can still get one bonded if it is in your contract, but there is no state law compelling it below $50,000. If your contract is right at the line, get written confirmation of the exact contract amount from the agency before assuming either way.
Is a township or county legally required to follow the same bonding rules as MDOT?
Yes, on the underlying statute — MCL 129.201 defines "governmental unit" broadly enough to cover the state, a county, city, village, township, school district, public educational institution, other political subdivision, public authority, or public agency, and MDOT is simply the state acting in that role. What differs is procurement process, not the bond law. MDOT additionally requires contractors to be prequalified in the applicable work classification (Forms 1300EZ and 1381) before they can even submit a bid as a prime contractor — a step townships and counties typically do not run. The Act 213 bond requirement itself (25% floor, admitted Michigan surety, filed with the awarding unit) applies the same way whether the obligee is MDOT or a five-person township board.
We're a subcontractor and never got paid on a Michigan public job — how do we actually make a claim against the payment bond?
MCL 129.207 sets the mechanics. If you had no direct contract with the principal contractor (i.e., you're a sub-subcontractor or a supplier to a subcontractor), you must serve written notice on the principal contractor within 30 days of first furnishing labor or material, then written notice to both the principal contractor and the governmental unit within 90 days of your last labor or material. Once 90 days have passed since your last work and you remain unpaid, you can sue on the payment bond for the unpaid balance. Keep dated delivery tickets, signed timesheets, and certified mail receipts for every notice — Michigan courts have held that actual receipt isn't required if notice was properly served, but you still need to prove you served it.
Do Michigan school districts actually set the bond at 100%, or is that just something contractors assume?
Most Michigan school bond-funded construction and renovation projects we underwrite do specify a bond at or near 100% of the contract price in the RFP, largely because school building projects are often financed through voter-approved bond issues and the district's legal counsel wants full contract-value protection. But this is a district-by-district contracting decision, not a separate statute — it still runs through the same MCL 129.202 framework as everything else, with the district simply choosing a figure well above the 25% floor. Never assume; the number that matters is whatever is printed in your specific RFP or contract, not what districts "usually" do.
How do I confirm a surety is actually authorized to write bonds in Michigan before I file one with a governmental unit?
MCL 129.204 requires the surety to be authorized to transact business in Michigan. Verify this yourself through the DIFS Locator (Michigan Department of Insurance and Financial Services) — search "Surety and Fidelity Entities" under the Insurance tab to confirm authorized status, or call DIFS directly at 877-999-6442. Michigan also permits surplus lines (unauthorized) insurers to write bonds when authorized carriers decline coverage, but a governmental unit can and often does reject a surplus-lines bond because claimants have less legal recourse. We place Michigan performance bonds only with DIFS-authorized, Treasury-listed carriers, but confirming status independently before you file the bond is good practice.
Official Michigan Resources
Primary sources for Act 213 and Michigan public contracting compliance
Just licensing up in Michigan? Contractor licensing runs through the Michigan contractor license bond first — that is a separate, fixed-amount consumer-protection bond, not the project-specific bond on this page. Browse all Michigan surety bond requirements, or the performance bond hub for other states. Need both bonds packaged? Performance & payment bonds covers how carriers issue them together. Our state-by-state performance bond guide compares Michigan's 25% floor against every other state we cover, and the learning center covers bond costs, claims, and renewals in more depth.
Estimate Your Michigan Performance Bond Premium
Free calculator — ballpark cost in under 60 seconds, no email required.
Other Michigan Bonds
Additional surety bonds available in Michigan
Nearby States
Performance bonds in neighboring states
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.
Get the Right Bond Amount the First Time
Guessing at 100% when your bid documents call for the 25% floor costs you a bid. Guessing low when a district wants full contract value costs you the award. Send us your contract amount and the percentage from your bid documents, and we'll return an accurate quote — most Michigan performance bonds issue the same day.