Bid & Performance Bonds
Payment Bond (Payment Bond)
A surety bond that guarantees the contractor will pay subcontractors, suppliers, and laborers.
Definition
A payment bond protects subcontractors and suppliers on the project. If the prime contractor fails to pay them, they can claim against the bond. This is critical on federal construction because the federal Miller Act requires payment bonds on contracts over $150,000 — and federal property is generally exempt from mechanic's liens, so the payment bond is the subcontractors' primary protection.
When it applies
Required on federal construction over $35,000 (Miller Act). Required on most state and local construction projects under "Little Miller Acts." Premiums are bundled with performance bond pricing typically.