If you want to land public-works jobs (federal, state, or local) in 2026, you’re going to have to get comfortable with surety bonds. Bid bonds, performance bonds, and payment bonds help ensure projects are built and people are paid. For contractors, bonding can feel like an obstacle to doing business, but handled correctly, it becomes a strategic advantage. When you build bonding capacity, you look stronger, win better contracts, and protect relationships with subcontractors and suppliers.
Surety Bond Professionals is a family-owned and operated bonding agency with over 75 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your construction bond needs.
What do bid bonds do for me?
A bid bond guarantees that if you are the low, responsive, responsible bidder, you will honor your bid price, enter into the contract, and provide the required performance and payment bonds. If you walk away after award or can’t provide the final bonds, the owner can file a claim against the bid bond and recover the difference between your bid and the next lowest eligible bid, up to the bond’s penalty (often 5–10% of the bid). From your perspective, the bid bond is your surety’s way of saying, “We’ve reviewed this contractor and are comfortable backing them at this size and scope.”
Why do I need performance bonds?
A performance bond guarantees that the project will be completed according to the scope, time, and specifications documented in the contract. If you default, the surety steps in and exercise one of these options:
- Finance you to complete the work (if that’s the least costly solution),
- Bring in another contractor to finish the job, or
- Pay the owner for completion costs up to the bond’s penal sum (often 100% of the contract price).
A performance bond is insurance for the owner that the project won’t die if you hit serious trouble. For you, it’s a way to access projects that require reassurance you can’t provide with your balance sheet alone.
Who is protected by payment bonds?
A payment bond guarantees that subcontractors, suppliers, and certain lower-tier parties will be paid for labor and materials furnished to the project. On public projects, subs and suppliers often cannot file mechanics liens; the payment bond is their protection. If you fail to pay, they can file a claim with the surety, following procedures set by statute or the bond form.
For you as the prime contractor, a payment bond:
- Builds trust with subs and vendors,
- Reduces the risk of job disruption from non-payment disputes, and
- Forces you to keep tight control on pay-when-paid, pay-if-paid, and cash-flow practices.
How do these construction bonds work together?
Bid bond gets you to the starting line; it’s a conditional promise that you’ll accept the job and furnish final bonds. The performance bond and payment bond are issued after award and protect the project through completion and closeout.
Many public owners require performance and payment bonds on contracts above a certain threshold (for example, federal projects under the Miller Act or state projects under Little Miller Acts). You should know these thresholds and standard forms in the states where you work, because they drive your bonding strategy and capacity planning.
How do I choose the right surety?
When you pick a surety (usually through a bond agent/broker), look at:
- Financial strength and ratings
- Construction and public-works expertise
- Bonding capacity and appetite
- Service and responsiveness
- Value-added support
A good rule: choose a surety like you would choose a joint-venture partner. You want someone who understands your strategy and wants to grow with you.
How do I obtain bonds and build bonding capacity?
View the process of surety underwriting like applying for a business line of credit. Be organized and proactive. For a more detailed breakdown of this process, see our comprehensive guide on how to build bonding capacity.
- Engage a knowledgeable bond agent/broker who focuses on construction surety, not someone who dabbles between auto and general liability policies.
- Assemble your underwriting package. Expect to provide:
- CPA-prepared business financial statements (ideally for the last 2–3 years),
- Interim financials and aging of receivables/payables,
- Work-in-progress (WIP) schedule and backlog,
- Personal financial statements of owners,
- Bank line of credit details,
- Project resume, key staff bios, and equipment list,
- Insurance and safety information (EMR, safety program, OSHA history), and a
- Continuity/ownership plan (what happens if something happens to you).
- Have a candid strategy conversation about your:
- Target job sizes, types of work, and regions,
- Recent wins and problem jobs,
- Profit targets, overhead, and how you’re dealing with 2026 realities like inflation, extended lead times, and labor shortages.
- Get a bond program, not just a one-off bond. The goal is to establish a bond line (single and aggregate limits) so that bid bonds and smaller contracts can be approved quickly within that framework.
- Request bonds on a job-by-job basis. For each project, your surety may ask for:
- Bid specs and bond form,
- Detailed estimate and schedule,
- Contract draft (for performance/payment bonds),
- Any special risks (liquidated damages, unusual warranties, heavy materials exposure).
The more transparent you are, the faster your surety can support your bids and the more comfortable they’ll be increasing your limits over time.
Frequently Asked Questions
Do I need separate performance and payment bonds, or is it one bond?
Many public owners require both a performance bond and a payment bond, often issued as two separate bond forms but sometimes combined. Always read the solicitation. Some specify separate 100% performance and 100% payment bonds; others allow a combined bond.
How soon should I start the bonding process before a big bid?
Start weeks, not days, before the bid date. If you don’t already have a bond line, it can take time to gather financials and for the surety to underwrite your company. Once a bond program is in place, bid bonds often can be turned around quickly, but only if the groundwork is done.
Will bonding hurt my ability to borrow from the bank?
Surety bonds and bank credit work together, but the surety will ask for a general indemnity agreement, and both the bank the surety will look at your working capital and net worth.
What’s the biggest mistake contractors make with bonds?
Waiting until a week before a big bid, hiding financial problems, or chasing work outside your expertise can spook a surety. The best practice is to be proactive, transparent, and disciplined.
