A performance bond costs a premium, a charge the surety sets account by account. It is not a published rate, and it is not the bond’s face amount, the penal sum, which is the most the surety can be called on to pay. This page covers what sets the price and which figures have a public source.
The penal sum is not the price
Start here, because most of the confusion downstream begins with this one substitution.
The penal sum is the number written on the face of the bond: the maximum the surety can be called on to pay. On federal construction, FAR 28.102-2(b) sets the penal amount of a performance bond at “100 percent of the original contract price” unless the contracting officer determines that a lesser amount is adequate for the protection of the Government. State statutes set their own, and they vary widely — some at the full contract amount, some at a fixed fraction, and at least one that measures the penal sum by the cost of the materials and labor rather than by any share of the price.
The FAR’s own definition of a penal sum, in FAR 28.001, calls it “the maximum payment for which the surety is obligated”, and the word premium does not appear on that page at all.
The premium is the charge for issuing that instrument, and it is a different figure from the penal sum. When FAR 28.102-2(b) sets the penal amount at “100 percent of the original contract price,” it is describing the face of the bond, not what the bond costs. Reading one as the other is how a contractor concludes that bonding a job costs as much as the job.
What the price is measured against
One thing the price turns on is the size of the bond, and on federal construction the FAR fixes how that size is measured. FAR 28.102-2(a) defines the original contract price as “the award price of the contract”, and says it “does not include the price of any options, except those options exercised at the time of contract award.” The definition also covers the less common contract types: for requirements contracts it is “the price payable for the estimated total quantity”, and for indefinite-quantity contracts “the price payable for the specified minimum quantity.”
The bond does not stay at that figure if the contract grows. For performance bonds on contracts exceeding $150,000, FAR 28.102-2(b)(1) requires the penal amount to equal “100 percent of the original contract price” and, “if the contract price increases, an additional amount equal to 100 percent of the increase.” Whether a federal contract needs a performance bond at all turns on the thresholds covered in our guide to the two federal bond thresholds.
The Government secures the added protection by directing the contractor to “increase the penal sum of the existing bond” or “obtain an additional bond”, as FAR 28.102-2(d) puts it.
Where a payment bond is also required, the same section says its amount “must be no less than the amount of the performance bond.”
So the number the surety is asked to stand behind moves with the contract. What it charges to do so is a separate matter, set by underwriting, and this page does not state a rate for it.
What the surety is actually underwriting
A surety is not insuring the project. It is extending credit against your ability to finish it, and it expects to be repaid for anything it pays out. That framing explains the file it asks for. The SBA describes the same test in its own program terms: a small business must “meet the surety company’s credit, capacity, and character requirements.”
The financial statements. Working capital and net worth set the outer bound of what can be supported. The level of assurance matters as much as the numbers — a compiled statement, a reviewed statement, and an audited statement are read very differently, and moving up a level is one of the few things a contractor can do that changes the answer rather than the tone.
The work-in-progress schedule. What is open, what is billed, what is left to earn, and whether jobs are being completed at the margins they were bid at. A WIP schedule that shows consistent fade tells a story no balance sheet does.
The track record on similar work. Similar in size, similar in type, similar in geography. A contractor who has done twenty jobs at one scale is not automatically underwritten for one job at four times that scale.
The contract itself. Scope, duration, liquidated damages, retainage, the owner’s reputation for paying, and any unusual conditions in the bond form. A well-run contractor can be declined on a badly written contract.
Character and continuity. Credit, indemnity, ownership, and whether the business survives the absence of the person who runs it.
Single limit and aggregate limit
Two separate ceilings govern how much bonded work you can carry, and contractors are surprised by the second one far more often than the first.
The single limit is the largest individual contract the surety will bond. The aggregate limit is the total bonded backlog it will carry for you at any one time. Both are set at the account level, and both move as your financials and your completed work move.
The practical consequence: a contractor comfortably inside their single limit can still be declined on a job because the aggregate is full of work that has not closed out yet. Bond capacity is consumed by open backlog and released as jobs complete — which makes closing out finished work an underwriting activity, not just an accounting one. If you are approaching a large bid, getting completed jobs formally closed and released is often worth more than any conversation about rate.
The one program figure with a published number
Almost nothing in surety pricing is published, because almost nothing is uniform. There is a real exception, and it is a federal program.
The Small Business Administration guarantees surety bonds for contractors who might not otherwise meet a surety’s criteria, and because it is a government program its terms are public. On its surety bond page, the SBA says performance and payment bond guarantees require a small business to pay “a fee of 0.6% of the contract price”, and that it “does not charge a fee for bid bond guarantees.” The SBA states that the fee is returned “if for some reason the bond is cancelled or not issued.”
The program has size limits, also published: the SBA lists “up to $9 million for non-federal contracts and up to $14 million for federal contracts.”
The SBA describes the guarantee as one that “allows the companies to offer surety bonds to small businesses that might not meet the criteria for other sureties”, and it lists qualifying as a small business under its size standards as a requirement. The fee above therefore applies only to businesses the program accepts.
Two cautions. That SBA fee is a guarantee fee, not the bond premium — it sits alongside the surety’s own charge rather than replacing it. And the program is aimed at contract bonds; it is not a general discount available to every account.
Why there is no rate table on this page
Surety rates are set company by company and applied account by account. There is no schedule a contractor can look up, no federal or state publication that sets the number, and no survey we are willing to represent as authoritative. We do not print a rate table because we have no primary source for one.
We would rather the page be incomplete and honest. Every figure on this page traces to a statute, a federal regulation, or a published program term, with the citation next to it. A “typical rate” sentence has no such source, so it does not appear.
What we can tell you before we quote is structural, and it is usually what the contractor actually wanted: whether the job is inside your likely capacity, what the file needs to look like, and what in the contract is going to give an underwriter trouble.
