What Bonds Are Required for Construction Projects?
Construction projects can require multiple types of surety bonds at different stages. From the license bond that lets you operate, to the bid bond that gets you in the door, to the performance and payment bonds that keep you on the job. This guide covers every bond type, when each is required, and who needs them.
Types of Construction Bonds
Each bond serves a different purpose and protects a different party. Understanding the full bonding landscape helps you prepare for any project requirement.
Contractor License Bonds
Mandatory in most states for licensure
Most states require contractors to post a license bond before issuing a contractor's license. This bond protects consumers against contractor fraud, code violations, or abandonment. Bond amounts vary by state: California requires $25,000 (CSLB), Nevada requires $5,000 to $100,000+ depending on classification (NSCB), and many states scale the requirement based on annual revenue or project size. The premium is typically 1% to 5% of the bond amount annually.
Bid Bonds
Federal projects over $150K, most public works
Bid bonds guarantee the project owner that you will honor your bid price and execute the contract if selected. Required on virtually all federal projects over $150,000 (Miller Act) and most state and local public works. Bid bonds are typically 5% to 10% of the bid amount. Pre-qualified contractors usually pay no premium. Without a bid bond, your proposal is automatically rejected on projects that require one.
Performance Bonds
Federal, state, and local public works; many private projects
Performance bonds guarantee you will complete the construction project per the contract terms, plans, and specifications. If you default, the surety steps in to ensure the project is finished. Set at 100% of the contract value on public works and typically packaged with a payment bond. Premium runs 1% to 3% of the contract amount. Required under the Miller Act, state Little Miller Acts, and increasingly on private institutional projects.
Payment Bonds
Same as performance bonds; always paired together
Payment bonds guarantee that subcontractors, material suppliers, and laborers get paid for their work on the project. On public projects where mechanics' liens cannot be filed against government property, the payment bond is the only financial protection for downstream parties. Always issued together with a performance bond at 100% of contract value. Required by the Miller Act and every state's Little Miller Act.
Maintenance Bonds
When specified in contract; common on public works
Maintenance bonds (also called warranty bonds) guarantee the contractor's workmanship for a specified period after project completion, typically one to two years. If defects in materials or workmanship appear during the maintenance period, the surety pays for repairs. Not required on all projects, but common on public works, infrastructure, and projects with extended warranty provisions. Usually a percentage of the contract value.
Subdivision and Site Improvement Bonds
When municipalities require assurance of infrastructure completion
Subdivision bonds guarantee that a developer will complete off-site improvements such as roads, sidewalks, utilities, and drainage required by the municipality as a condition of subdivision approval. Without this bond, the municipality would have no assurance that infrastructure serving the development will be built. Bond amounts are set by the municipality's engineer estimate for the improvements.
Detailed Guides for Each Bond Type
Bid Bonds
Complete bid bond guide
Performance Bonds
Project completion guarantee
Payment Bonds
Sub and supplier protection
Related Educational Guides
Bid vs Performance
Side-by-side comparison
How Bonding Works
Step-by-step bonding process
Public vs Private
Bonding by project ownership
State Contractor Bonds
Bond Requirements FAQ
What bonds are required for construction projects?
The bonds required depend on the project type and owner. Federal projects over $150,000 require bid bonds, performance bonds, and payment bonds under the Miller Act. State and local public works have similar requirements under Little Miller Acts, with varying thresholds. Most states require a contractor license bond for licensure. Private projects may require performance and payment bonds at the owner's or lender's discretion. The project specifications or invitation to bid will list all bonding requirements.
Are bonds required on private construction projects?
Private project bonding is at the owner's discretion. There is no law requiring bonds on most private work. However, institutional owners (hospitals, universities), commercial developers, and lenders increasingly require performance and payment bonds on projects over $1M. When a private owner requires bonds, they function identically to public project bonds. Subcontractors on private projects typically have mechanics' lien rights as an alternative to payment bond protection.
What is the Miller Act?
The Miller Act (40 USC 3131-3134) is the federal law requiring performance bonds and payment bonds on all federal construction contracts over $150,000. It also effectively requires bid bonds through the Federal Acquisition Regulation (FAR). The Miller Act was enacted in 1935 because subcontractors cannot file mechanics' liens against federal property. Every state has a similar law (Little Miller Act) for state-funded construction.
Do subcontractors need bonds?
Subcontractors are not required by law to carry bonds in most situations. However, general contractors frequently require subcontract bonds (performance and payment bonds from the sub) on larger projects or when the subcontract exceeds a certain threshold, often $100,000 to $500,000. Having bonding capacity as a subcontractor is a competitive advantage because it demonstrates financial strength and gives the GC additional security.
How many different bonds might I need on a single project?
On a typical bonded public works project, you need three bonds: a bid bond (submitted with your proposal), a performance bond (provided after award), and a payment bond (provided with the performance bond). Some projects also require a maintenance bond after completion. If you are a licensed contractor, your state license bond runs continuously in the background. So a single project could involve four to five active bonds.
Not Sure Which Bonds You Need? We Will Help.
Every project has different bonding requirements. Our specialists review your bid documents, identify every bond you need, and get you approved quickly so you can focus on winning work.