Performance and Payment Bond

A performance bond guarantees that a contractor will complete a project according to the terms of the contract. If the contractor fails to perform, the project owner can make a claim against the bond to recover its loss. Performance bonds are most common in construction and are usually paired with a payment bond, which guarantees that subcontractors, laborers and suppliers get paid.

How a performance bond works

The bond is an agreement among three parties: you, the contractor (principal); the project owner or agency that requires the bond (obligee); and the surety that issues it. If the owner makes a claim, the surety investigates. A valid claim is paid to the owner up to the bond amount, and you must repay the surety. If the surety finds you met the contract terms, the claim is denied.

Performance bond vs. payment bond

A performance bond protects the project owner by guaranteeing the work is completed as agreed. A payment bond protects subcontractors, laborers and suppliers by guaranteeing they are paid for their work and materials. Many projects require both, and sureties often issue them together as performance and payment (P&P) bonds.

Bond amount and your premium

The contract sets the bond amount, which is often 100% of the contract price. That amount is the coverage required, not the price you pay. Your premium depends on the surety's underwriting, including your credit, financial statements, experience and the size and complexity of the project. If change orders increase the contract price, the bond amount and premium may need to increase too. Request a quote for your project rather than relying on a fixed rate.

How to apply

Apply as soon as you learn the contract requires a bond, since bonds are usually due before work can start. Start the online application with your business information and the contract details. WWIS will review your submission and help you with the quote, required documents and issuance. Each project needs its own bond. Approval and timing depend on the surety and a complete application.

Information needed to apply

Bidding on a federal project?

Federal law, formerly known as the Miller Act, requires both performance and payment bonds for federal construction contracts over $150,000. Each bond generally equals 100% of the original contract price unless the contracting officer approves a lower amount. Bonds must be furnished before you receive a notice to proceed. Many states and local governments have similar rules for public projects.

Review federal bond requirements

Get help with your application

Call 888-518-8011 or email [email protected] for help selecting the bond and completing your application.