SubcontractorBonds
Whether you are a general contractor deciding which subs to bond or a subcontractor that has been asked for a performance and payment bond, this guide covers exactly how sub bonds work. It pairs with our broader construction bonding hub. You never pay until your bond is issued and delivered.
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Performance and payment bonds for your trade scope
When a Subcontractor Needs Its Own Bond
There is no statute that forces a subcontractor to be bonded. A subcontractor bond is a contractual requirement that flows down from the general contractor, not a legal one. The GC requires performance and payment bonds from a sub to transfer the risk of that sub defaulting — the same way an owner requires bonds from the prime contractor.
In practice, most GCs apply a threshold. A common rule of thumb is that any subcontract above roughly $100,000 gets bonded, but that number is entirely at the GC's discretion and is driven by the sub's size, the scope of work, and how critical or replaceable the trade is. A structural steel package or a mechanical sub on the critical path is far more likely to be bonded than a small finishes trade. Owners or lenders on a private job may also push a GC to bond its key subs, though that, too, is a matter of contract rather than law.
On federal projects there is one statutory touchpoint that matters to subs. Under FAR 52.228-12, when a subcontractor or supplier asks, the prime contractor must promptly provide a copy of the payment bond. That lets a sub confirm the bond-back protection described below before it starts work.
Official Federal Requirements
"The Contractor shall promptly provide a copy of such payment bond to the requester [any prospective subcontractor or supplier offering to furnish labor or material]."Federal Acquisition Regulation — Prospective Subcontractor Requests for Bonds (acquisition.gov) • FAR 52.228-12
Paraphrased for brevity; read the full clause text at acquisition.gov. For how bonding thresholds work on public jobs generally, see our Miller Act requirements guide.
Bond-Back Protection: How the Prime's Payment Bond Covers You
Here is the part that catches subcontractors off guard. On a bonded public job, you may not need a bond of your own to be protected — because the prime contractor already posted a payment bond, and that bond exists to protect subs and suppliers when the prime fails to pay. The catch is that your rights depend on where you sit in the chain and on two hard deadlines you cannot miss.
First-Tier Claimant
You have a direct contract with the prime (a true subcontractor or direct supplier).
- No written notice required. You can sue directly on the payment bond.
- You may file suit 90 days after your last labor or material.
- You must file suit within 1 year of your last labor or material.
Second-Tier Claimant
You have no direct contract with the prime — e.g., a supplier to a subcontractor.
- Written notice to the prime within 90 days of last labor or material — stating the amount claimed and who it was furnished to.
- You also must file suit within 1 year of last labor or material.
- Miss the 90-day notice and the claim is forfeited.
One more protection worth knowing: under the Miller Act, a waiver of your right to sue on the payment bond is void unless it is in writing, signed by you, and signed after you first furnished labor or material. A pre-work waiver tucked into a subcontract has no effect. The same logic underpins our combined P&P bond guidance for primes.
Official Federal Miller Act Requirements
"A person having a direct contractual relationship with a subcontractor but no contractual relationship... with the contractor furnishing the payment bond may bring a civil action on the payment bond on giving written notice to the contractor within 90 days from the date on which the person did or performed the last of the labor or furnished or supplied the last of the material... An action brought under this subsection must be brought no later than one year after the day on which the last of the labor was performed or material was supplied."40 U.S.C. §3133 — Rights of persons furnishing labor or material (uscode.house.gov) • 40 U.S.C. §3133
See also 40 U.S.C. §3131 (when bonds are required) and the anti-waiver rule at 40 U.S.C. §3133(c) on law.cornell.edu.
The Three Subcontractor Bond Types
On a bonded sub, the general contractor is the obligee and the subcontractor is the principal. Performance and payment bonds are almost always issued together for one premium.
Subcontractor Performance Bond
Obligee: the general contractor
Guarantees the sub finishes its scope of work to the subcontract terms. If the sub defaults or walks off, the surety must finance the completion, hire a replacement trade, or pay the GC up to the penal sum (the subcontract value).
Subcontractor Payment Bond
Obligee: the general contractor
Guarantees the sub pays its own lower-tier suppliers and sub-subs. It shields the GC and the project from liens and second-tier payment-bond claims that a sub's unpaid suppliers would otherwise pursue.
Subcontractor Bid Bond
Obligee: the general contractor
Guarantees the sub will honor its bid and enter the subcontract at the quoted price if selected. Common on hard-bid trade packages; seldom required on negotiated or pre-qualified work, and usually issued free to prequalified subs.
These mirror the bonds a prime carries. For the standalone product pages, see performance bonds, payment bonds, and bid bonds.
Sub Bonds vs. Subcontractor Default Insurance (SDI / SubGuard)
Large GCs sometimes self-insure sub risk with SDI instead of requiring bonds. They are not the same product — and SDI does not protect the people a bond does.
Surety Bond vs. SDI (SubGuard)
A three-party guarantee versus the GC's own first-party insurance
| Feature | Subcontractor Surety Bond | SDI / SubGuard |
|---|---|---|
| Parties | Three-party: surety, sub (principal), GC (obligee) | Two-party: GC's own first-party insurer |
| Who controls the claim | The surety decides the remedy | The GC controls the claim and completion |
| Deductible | None — first-dollar coverage | Large — roughly $350K to $2M |
| Who can qualify | Subs of all sizes; surety prequalifies the sub | Large GCs only — often $50M+ in revenue |
| Protects the owner / subs / suppliers | Yes — an owner can be named obligee | No — protects only the GC |
| Prequalification | Surety independently vets each sub | GC self-prequalifies its subs |
SubGuard is Zurich's brand of subcontractor default insurance. SDI is the GC's first-party risk-transfer tool; a surety bond is an independent third-party guarantee that also vouches for the sub's capacity.
For a subcontractor, being bonded is a credential: an independent surety has reviewed your finances and capacity and stands behind your scope. To understand how sureties size that capacity, read our bonding capacity guide.
What a Subcontractor Bond Costs
Sub bonds are priced as a percentage of the subcontract value (the penal sum). These ranges are approximate; the rate per $1,000 of bond drops as the subcontract grows.
Strong-credit subs pay at the low end (about 0.5% to 1%), most qualified subs land in the 1% to 3% band, and weaker or newer subs may pay 3% to 5% or more. Bid bonds are typically free for prequalified subs. If your credit or track record is limited, the SBA Surety Bond Guarantee Program can back bonds up to $9 million ($14 million on federal contracts) for a 0.6% guarantee fee. For the full breakdown, see our construction bond cost guide and the broader surety bond cost guide.
State Public Jobs: Little Miller Act Protection
The bond-back protection is not limited to federal work. Every state has its own "Little Miller Act" that requires the prime on a state or local public project to post a payment bond protecting subs and suppliers in much the same way. The mechanics rhyme with the federal rule — first-tier versus second-tier status, a notice requirement, and a suit deadline — but the dollar thresholds and notice deadlines vary by state, sometimes significantly.
Before relying on a state payment bond, confirm the exact threshold and deadlines that apply where the project sits. Our by-state reference breaks down each state's bond threshold and notice clock: see the Little Miller Act state thresholds guide.
Subcontractor Bond FAQs
Answers for both GCs who require sub bonds and subs who must get bonded
When does a subcontractor need its own bond?
How does the prime contractor's payment bond protect subcontractors?
What is the difference between a subcontractor performance bond and a payment bond?
How much does a subcontractor bond cost?
Is subcontractor default insurance (SDI) the same as a sub bond?
Can a subcontractor waive its payment-bond rights before starting work?
Explore the Construction Bonding Cluster
Subcontractor bonds are one piece of a project's bonding stack. Start at the construction bonds hub to see how they fit together.
Performance & Payment Bonds
The combined prime-contractor bonds subs flow down from
Performance Bonds
Guaranteeing completion of a scope of work
Payment Bonds
The bond-back protection for subs and suppliers
Bid Bonds
Honoring a bid on a hard-bid trade package
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.
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