Types of Bonds\n\nContract surety bonds\n- Bid bond — guarantees the bidder will sign at the bid price if awarded.\n- Performance bond — guarantees completion per the contract.\n- Payment bond — guarantees subs, suppliers, and labor get paid (often paired with the performance bond; required on public work via the Miller Act).\n- Maintenance / warranty bond — covers defects for a period after completion.\n\nOther bonds contractors meet\n- License / permit bond — required to get the contractor license in many states.\n- Subdivision / site-improvement bond — guarantees a developer finishes public improvements.\n- Supply bond — guarantees a supplier delivers materials.
Going Deeper (Intermediate)
The three contract bonds you'll meet:
- Bid bond — guarantees you'll honor your bid and provide the other bonds if awarded.
- Performance bond — guarantees you'll complete the work per the contract.
- Payment bond — guarantees you'll pay your subs and suppliers. Plus license/permit bonds (required to hold a license) and maintenance/warranty bonds (cover the warranty period).
Advanced / Pro-Level
Where bonds really matter:
- On public projects you can't lien public property, so the payment bond is the subs' remedy — the federal Miller Act requires performance + payment bonds on contracts over $150k; state "Little Miller Acts" mirror it.
- Bonds are usually 100% of the contract value; cost is ~0.5–3%, driven by your surety credit.
- You can require subcontractor bonds (subs bond back to you) to transfer risk down on shaky or large subs.
- Claims trigger your indemnity — bonded default is expensive and reputation-damaging.
Practice Challenge
On a $2M federal job, a sub you didn't pay can't lien the building. What's their recourse, and which bond is it? (Answer: they make a claim against your payment bond (Miller Act) — that's exactly why it exists, since public property can't be liened; you then owe the surety under your indemnity.)
In Practice
Bidding a public job, you bring a bid bond; once awarded, you provide performance and payment bonds. Show up not knowing which bond you need and you can't even bid.
Common Mistakes to Avoid
- Not knowing which bond a job requires
- Confusing payment and performance bonds
- Forgetting license/permit bonds for licensing
Takeaway: Know your bonds: bid, performance, payment, maintenance, license, subdivision, and supply.