Performance & Payment
Performance Bond
A construction bond that guarantees a contractor will finish the job according to the contract.
- Required by
- Federal agencies under the Miller Act, state and local public owners, and many private owners and lenders
- Bond amount
- Set by whoever requires the bond. We confirm it.
What this bond guarantees
The bond protects the project owner (the obligee) if the contractor defaults. If the contractor fails to perform, the surety may finance the contractor, arrange completion, or pay the owner's loss up to the bond amount.
Who needs it
- General contractors on public works
- Subcontractors bonded to a general contractor
- Contractors on private jobs where the owner or lender requires 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
How large is a performance bond?
Usually the full contract price. Alabama Code 39-1-1 requires a performance bond equal to 100% of the contract price on public works contracts of $100,000 or more.
When is one required on federal work?
FAR 28.102-1 requires performance and payment bonds on federal construction contracts over $150,000.
Is a performance bond the same as insurance for the contractor?
No. It protects the owner. If the surety pays a claim, the contractor and its indemnitors must repay the surety.