Performance & Payment Bonds

What performance & payment bonds are

A performance bond guarantees that you will complete a contract according to its terms. A payment bond guarantees that you will pay your subcontractors and suppliers. They almost always travel together on construction contracts, especially public ones, and they protect the project owner and the people working below you — not you. If a valid claim is paid, you repay the surety.

One contract, two separate protections:

The federal rule, and why you see two different numbers

On federal construction work the bond requirement is the Miller Act, and it is printed two different ways because it is written down in two different places. The statute, at 40 U.S.C. § 3131(b), reads: “Before any contract of more than $100,000 is awarded for the construction, alteration, or repair of any public building or public work of the Federal Government, a person must furnish to the Government the following bonds, which become binding when the contract is awarded.”

The Federal Acquisition Regulation states the same requirement at the inflation-adjusted figure. FAR 28.102-1(a) reads: “40 U.S.C. chapter 31, subchapter III, Bonds (formerly known as the Miller Act), requires performance and payment bonds for any construction contract exceeding $150,000.”

Both figures are correct, and they are not the same figure. A page that prints one of them without the other is printing half the rule and is wrong to somebody — which is why we print both, with the citation beside each. The threshold your contracting officer is applying is the one in the solicitation.

The amount of the bonds is set separately from the threshold that triggers them. FAR 28.102-2(b) requires a performance bond that “must equal 100 percent of the original contract price” unless the contracting officer determines a lesser amount is adequate, and requires that “the amount of the payment bond must be no less than the amount of the performance bond.” The statute itself, at § 3131(b)(1), sets the performance bond at “an amount the officer considers adequate” and names no percentage at all.

State rules are not the federal rule

Every state has its own public-works bond statute, and almost none of them use the federal numbers. Some set one threshold; several set two, doing two different jobs. Some fix the penal sum at a percentage of the contract; at least one fixes it to the cost of the inputs and names no percentage anywhere. We are writing these up state by state, from the statute:

• Annual vs Job-Specific Bond Programs
• How a Payment Bond Claim Is Actually Made
• Increasing a Bond Mid-Contract After a Change Order
• The Miller Act in One Page: All Four Sections
• Penal Sum Meaning: What It Is and Why You Do Not Pay It
• Cash, Certified Check, or Bond: When You Get to Choose
• What Happens Between $35,000 and $150,000 on a Federal Job
• Federal Performance Bond Requirements: The Two Thresholds
• Getting a Copy of the Payment Bond You Are Claiming Against
• How Much Does a Performance Bond Cost? What Sets the Price
• Miller Act vs. Little Miller Acts: What Actually Differs
• Your Payment Bond Rights Cannot Be Waived Up Front
• Can You Get a Performance Bond With Bad Credit?
• Retainage and Bonds Are Two Different Protections
• The SBA Surety Bond Guarantee Program, Explained
• The States That Set Two Bond Thresholds, Not One
• Surety Bond vs. Letter of Credit
• The One-Year Clock on a Payment Bond Claim
• The States That Do Not Require 100 Percent
• Who Is Protected by a Payment Bond, and Who Is Not

And the state-by-state reads, each one written from that state’s own statute:

• Colorado Public Works Bonds: Half, and a Bond Sized to the Year
• Connecticut Public Works Bonds: A Statute That Limits the Obligee
• Florida Public Works Bonds: When the Bond Is Less Than the Job
• Idaho Performance and Payment Bond Requirements for Public Work
• Illinois Public Works Bonds: The State at the Federal Number
• Indiana Public Works Bonds: A Bond Assembled in Pieces
• Louisiana Public Works Bonds: Three Figures and a Ten-Day Clock
• Maine Public Works Bond Requirements: 14 M.R.S. § 871
• Maryland Construction Security: The Act That Never Says Bond
• Nevada Public Works Bonds: The State That Bonds the Subs
• New Hampshire Bonds: Where the Claim Gets Filed
• North Dakota Public Improvement Bonds: N.D.C.C. § 48-01.2-10
• Oklahoma Public Works Bonds: Three Ways to Satisfy 61 O.S. § 1
• Oregon Public Improvement Bonds: Transportation Comes Sooner
• Pennsylvania Public Works Bonds: Two Sections, Two Figures
• South Carolina Performance and Payment Bond Requirements
• Texas Performance and Payment Bond Requirements for Public Work
• Virginia Public Construction Bonds: The Highest Thresholds Read
• West Virginia Public Work Bond Requirements: No Threshold
• Wisconsin Public Works Bonds: Two Thresholds, Neither Round

Who needs them

Contractors taking on public projects, and private owners who require bonding. On most public work, the owner requires both bonds before you can start. The bonds tell the owner the job will be finished and everyone on it will be paid.

How to get them

These bonds are financially underwritten, so they start with a conversation rather than an instant-issue button. Contact a producer; we gather your financial statements, work history, and the contract, and the surety underwrites the bond around that specific project. We will tell you exactly what is needed and move as fast as the file allows.

What drives the cost

The premium is a percentage of the contract amount, set by your financial strength, your experience on similar work, and the size and type of the job. Because each bond is underwritten against a specific contract, we quote it from the surety after review rather than publish a rate that would not fit your project.

Browse by state

Find the performance & payment bonds your obligee requires. We write bonds in 48 states; states we have built out link straight through, and the rest are still covered — call 317-942-0549 and a producer will place your bond today.

• Alabama
• Arizona
• Arkansas
• California
• Colorado
• Connecticut
• Delaware
• Florida
• Georgia
• Idaho
• Illinois
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• Nevada
• New Hampshire
• New Jersey
• New Mexico
• New York
• North Carolina
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Pennsylvania
• Rhode Island
• South Carolina
• South Dakota
• Tennessee
• Texas
• Utah
• Vermont
• Virginia
• Washington
• West Virginia
• Wisconsin
• Wyoming

Other bonds we write

• Contractor License & Permit Bonds
• Bid Bonds

Frequently asked questions

What is a performance bond?

A performance bond guarantees that you will complete a contract according to its terms. If you default, the obligee — the project owner — can call on the surety to see the work finished, and you are responsible to repay the surety.

What is a payment bond?

A payment bond guarantees that you will pay your subcontractors and suppliers on the project. It protects the people below you on the job, and on public work it often replaces the lien rights they would otherwise have.

How are these different from a license or bid bond?

License and bid bonds issue instantly from your credit. Performance and payment bonds are financially underwritten and tied to a specific contract — the surety reviews your finances and the job before issuing, so they start with a conversation, not an instant-issue button.

How do I get a performance and payment bond?

Contact a producer. We gather your financial statements, work history, and the contract, and the surety underwrites the bond around that specific project. We will tell you what is needed and move as quickly as the file allows.

What do these bonds cost?

The premium is a percentage of the contract amount, set by your financial strength, experience, and the size and type of the job. Because it is underwritten per contract, we quote it from the surety after review rather than publish a rate that would not fit your job.

What do underwriters look at?

Your financial statements, your track record on similar work, your available working capital and credit, and the contract itself. Stronger financials and relevant experience generally mean easier approval and better terms.