Performance Bond CalculatorCredit-Weighted Premiums on a Sliding Scale

No. Under an AIA A312 performance bond the surety is not obligated until the obligee formally declares the contractor in default, terminates the contract for default, and notifies the surety. The surety then chooses among several remedies: (1) arrange for the original contractor to finish with surety financing, (2) take over completion directly (a "takeover" where the surety steps into the principal’s shoes and subcontracts the work), (3) tender a replacement completion contractor, or (4) pay a penal-sum settlement. If the owner skips the default-and-notice conditions precedent, the surety’s liability can be wholly or partially discharged — this is one of the most litigated issues in performance-bond claims.

Sureties use sliding-scale rate tables filed with state insurance departments and informed by SFAA loss-cost data. Underwriting and surety expenses are largely fixed per bond, so a $100,000 job carries proportionally more cost-per-dollar than a $5,000,000 job. A typical published scale charges around 2.5% for the first $100,000 of contract amount, 1.5% for the next $400,000, and 1.0% (dropping toward 0.5% for prime accounts) above $500,000. Contract size sets the base rate; your credit and financial statements then push the final premium above or below that base. Our calculator multiplies the size-based base by a credit-tier factor to produce the range you see.

For contracts under about $500,000 the credit tier is the dominant lever. A $250,000 job quoted at 2.0% for standard credit can drop to 1.6% for a 740+ FICO or rise to 3.5%–4%+ for credit below 620 with weak financials. For contracts above roughly $1,000,000, sureties shift weight to CPA-reviewed financial statements, working-capital ratios, and completed-contract history — credit becomes a qualifier rather than the primary pricing driver. On true "standard-market" accounts (clean personal credit, two years of profitable CPA financials, equivalent-size completed jobs) the rate floors in the 0.75%–1.0% range regardless of FICO above 700.

Private owner practice varies widely. Institutional owners (hospitals, universities, developers with lender covenants) often require a dual-obligee rider naming both the owner and the construction lender, so the lender can trigger surety performance if the owner stops paying or goes bankrupt. Some private contracts import Miller-Act-style 100%-of-contract bonding; others negotiate lower penal sums or accept subguard / SDI (subcontractor default insurance) instead. Step-in rights are a contract matter — they are not automatic under the bond. If the AIA A312 form is used, the surety’s remedies (including engaging a completion contractor) are spelled out in Section 5 of the bond and require the owner to first comply with the conditions precedent in Section 3.

Partially, and only if the underlying contract extends the principal’s performance obligation into the warranty period. The AIA A312 performance bond ends at final completion of the work and bars suit more than two years after the earlier of declaration of default, contractor cessation, or surety refusal. Post-completion defect coverage is the job of a separate AIA A313 Warranty Bond, which begins at final completion and runs for two years unless the parties agree otherwise. If a contract requires "bonded warranty," ask whether the owner wants A312 warranty-period coverage written into the performance bond or a stand-alone A313 — they are priced differently and protect different risks.

This matters for the payment bond side of a combined P&P program, but it flows through to performance bond claims where subs walk off for non-payment. "Pay-when-paid" is a timing clause — it delays a subcontractor’s payment until the GC is paid but does not permanently excuse the obligation. "Pay-if-paid" is a risk-shifting clause — the GC’s duty to pay the sub is conditional on the GC being paid by the owner. States split on enforcement: some (New York, California, Wisconsin) void pay-if-paid against payment-bond claims as contrary to public policy; others (Florida, Texas with strict drafting) enforce it. If a contract imposes pay-if-paid, confirm in writing whether the payment bond surety can raise that defense against second-tier claimants — because if it can, the bond offers materially less protection than the penal sum suggests.