Bid Bonds, Performance Bonds and Payment Bonds for Government Contracts
Updated
Federal construction work usually needs surety bonds: a bid bond when you bid, and performance and payment bonds when you win. They are issued by a surety company, not by the government. 895 federal construction opportunities are open today; Federal Bid Alerts sends the new ones that match your business every morning.
Newest federal construction bids
The three bonds
- Bid bond: guarantees that if you win you will sign the contract and provide the other bonds. On federal work it is commonly a percentage of the bid price, as the solicitation states.
- Performance bond: guarantees the work gets finished; if the contractor fails, the surety pays to complete it.
- Payment bond: guarantees that subcontractors and suppliers get paid.
The Miller Act
The Miller Act requires performance and payment bonds on federal construction contracts above a set value; the solicitation says which bonds and amounts apply. Bonds must come from a surety the Treasury approves (listed in its Circular 570).
How to get bonded
- Work with a surety bond agent who places bonds with Treasury-listed sureties.
- Have your financial statements, work history and backlog ready: the surety prices the bond on your credit and track record.
- If you are new or small, the SBA's Surety Bond Guarantee program can back the surety and make the bond easier to get.
The premium is a small percentage of the contract value, depending on your finances and record. See open construction bids by state: construction contracts by state.
Questions
What is a bid bond?
A surety bond that guarantees a bidder will sign the contract and provide the required performance and payment bonds if it wins.
What is the difference between a performance bond and a payment bond?
A performance bond guarantees the work is completed; a payment bond guarantees subcontractors and suppliers are paid.
Do federal contracts require bonds?
Federal construction contracts above the Miller Act threshold require performance and payment bonds; the solicitation states what is needed.