Construction Bond Overview

Construction bonds, commonly also referred to as contract bonds and contractor bonds, are typically required of licensed and bonded contractors when they perform work on a construction project.

Different construction bonds are necessary at different stages of a construction project:

  • Bidding- a bid bond is often requested
  • Performing work on a project- a performance bond is necessary
  • Finishing and guaranteeing work- a maintenance bond serves this purpose

These bonds are meant to guarantee the quality of a contractor’s work at any stage of involvement in a construction project, their compliance with the contract conditions and with state regulations.

Some projects, such as federal construction projects with contracts over $100,000, always require a number of contract bonds to be posted by contractors. The same goes for many state projects, and for quite a few private construction projects as well.

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To find the construction bond you need, have a look at the list below. You can also find further information about bond cost– and how to get your bond– in the sections below.

Types of Construction Bonds

Bid Bond

A bid bond is used as security for bids submitted on a contract. Placing security on a bid guarantees that the bidder will execute the contract at the bid price, upon award of the bid. If security is not submitted with the bid, the bid is rejected. Additionally, if the winning bidder does not enter into a contract, the security is forfeited.

Maintenance Bond

Also known as a warranty bond, a maintenance bond guarantees to the project owner that, within a certain maintenance term after the project's completion, there will be no faults in the structure. A maintenance bond guarantees for the quality of workmanship and the materials used.

Payment Bonds

A payment bond guarantees that a contractor will pay suppliers, laborers, and subcontractors (subject to contract terms) for the labor and materials they have provided. Generally, payment and performance bonds are issued together as one bond, termed a “Performance and Payment Bond”.

Performance Bonds

A performance bond– another type of construction bond– guarantees that a contractor will adhere to the terms and conditions of a contract. The winning bidder upon award of the contract submits this bond. Generally, performance and payment bonds are issued together since they are closely related.

Public Works Bond

A public works bond is similar to the performance and payment bonds mentioned above but applicable to state-level projects.

Site Improvement Bond

A site improvement bond guarantees that a developer will properly install improvements to an existing structure, in accordance with applicable building codes. This bond says that any public property affected by private improvements will be upgraded as per government requirements.

Subdivision Bonds

A subdivision bond guarantees that builders, developers, and individual landowners complete improvements made to a subdivision property. This bond, required by local authorities, usually guarantees that the improvements will be made at the expense of the developer and principal of the bond.

Supply Bond

A supply bond, a type of contract bond, guarantees the supplier will furnish supplies or materials as contracted. Should the supplier default, the surety will underwrite the purchaser of the supplies against any loss. This bond is required by the project owner or state or federal law to secure public construction projects.

Construction Bond Requirements

In order to obtain a construction bond you must first be a ‘licensed and bonded’ contractor. This means that you must have obtained the relevant contractor license for the state you are operating in.

As part of this licensing process you must obtain a contractor license bond which guarantees that you will comply with federal and state regulations for contractors in performing your work.

Construction Bond Cost

How much your construction bond costs depends on the type of bond you are obtaining and the amount of the contract you are obtaining the bond for. Based on this, bond cost is determined by your surety.

The cost of your bond is always a fraction of the full amount of your bond. When determining your rate, sureties consider your personal credit score as one of the indicators of your financial health and stability. For contract bonds in particular, sureties may also request very detailed financial information, especially if the amount of your bond is very high.

Unlike with most other bonds, there are no special markets (bad credit) for contract bonds. Applicants with slight but not severe credit issues may still be able to get bonded, but on a case-by-case basis. If you would like to know more about this possibility, call us at (866)-450-3412 to speak about this with one of our surety experts.

How to Get a Construction Bond

Applying for your contract bond is easy, thanks to our simple application tool. All you need to do is apply online here, and fill in the application form. After we process your application, and depending on the specifics of your case, we may ask you to supply us with additional information or documentation.

If you have any questions which you want to have answered before you apply for your bond, call our bond professionals at (866)-450-3412. All of Bryant Surety Bonds’ professionals are experts on bonding requirements for contractors, and happy to help you.

Take a look at our ‘What is a surety bond’ guide, for plenty of additional information and guidance.

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