Performance & Payment
Payment Bond
A construction bond that guarantees a contractor will pay its subcontractors, laborers, and suppliers on a project.
- Required by
- Federal agencies under the Miller Act, state and local public owners, and some private owners and lenders
- Bond amount
- Set by whoever requires the bond. We confirm it.
What this bond guarantees
The bond is issued to the project owner (the obligee) and protects the people who supply labor and materials to the job. If the contractor does not pay them, they can claim against the bond instead of filing a lien. On public work, it replaces lien rights that do not exist against public property.
Who needs it
- General contractors on public works
- Subcontractors whose contracts require bonds
- Contractors on private jobs where the owner or lender asks for one
What the underwriter looks at
- Contractor financial statements
- Work on hand and backlog
- Experience on similar jobs
- Bank line of credit
Requirements vary by state and by who asks for the bond. Send us the request you received and we will confirm exactly what it calls for.
Common questions
When is a payment bond required on federal work?
Under the Miller Act, as stated in FAR 28.102-1, federal construction contracts over $150,000 require both performance and payment bonds.
What does Alabama require on public works?
Alabama Code 39-1-1 requires a payment bond of at least 50% of the contract price on public works contracts of $100,000 or more. A claimant must give the surety 45 days' written notice before suing and must sue within one year of final settlement.
Is a payment bond usually written with a performance bond?
Yes. Most owners require both, and sureties usually issue them together for one premium.