Overview of Public Works Bond Requirements
This bond is a type of contract bond - it is required for the performance of public construction works. Similar to the payment bonds or performance bonds that are commonly required for federal projects under the Miller Act, the public works bond is their equivalent on the state level - required by the so-called Little Miller Acts. Nearly all states require some form of this bond.
Depending on state statutes, such bonds may be required to secure both the performance of the contract and the payment to subcontractors or, in some cases, only the latter. The purpose of this bond is to provide security on public works projects, to guarantee that contractors will comply with state law, and to provide compensation to the public and the state in cases of breach of contract or default.
In the case of such a violation, a claim can be filed against such bonds, and compensation can be received by claimants up to the full penal sum of the bond, which is determined on a state level.
Find out more about how bonds work, and why you need one from our detailed ‘What is a surety bond’ guide!
For any questions about this or other bonds, call us at (866)-450-3412 anytime!
Cost of Your Bond
The cost of your bond is a percentage of the full bond amount. The amount for this type of bond is determined on a state level, and on the basis of the contract you have been awarded. Most states mandate a certain minimum amount of the public works contract beyond which a bond is required.
For example, in Alabama a performance and payment bond is required only on contracts at $50,000 or above. Alabama state requires both performance and payment bonds, with the formering covering 100% of the contract, and the latter covering 50% of the contract.
While some states have a higher contract threshold, the average contract amount requiring a bond in most state is somewhere between $25,000 and $50,000.
The cost of your bond will be a fraction of that amount and will be determined on the basis of your personal credit score. The higher your score, the lower your rate. If you are required to get a $50,000 bond, and are given a 2% rate on your bond, you will need to pay $1,000 to get this bond.
The simplest way to determine the exact rate at which you can get bonded is to submit a surety bond application. We will provide you with a free quote, with no obligations attached!
Claims Against Your Bond
The claims that can be filed against your bond, depend on the type of bond you need to obtain, and its conditions. Most of these bonds are conditioned upon either the proper execution of a public works project that the contractor has been awarded or the timely payment to subcontractors for any labor performed or material provided.
For example, the state of Michigan requires contractors to obtain such a bond on contracts exceeding $50,000. Its amount is determined on a case by case basis by the responsible government unit but can be no less than 25% of the contract amount. The bond itself has to be conditioned on “the faithful performance of the contract in accordance with the
plans, specifications and terms thereof.”
In this case, the violation of any of these conditions by defaulting on a contract can result in a claim being filed against your bond. Similarly, when a bond guaranteeing payment to subcontractors is required, violating this condition can lead to a claim.
In such a case your surety will investigate the situation and compensate claimants up to the full amount of the bond for any losses they have sustained. In return, you will be required to reimburse the surety for any money it extends to claimants.
Get Your Bond Today!
Apply for your bond by completing our online surety bond application form. We will then provide you with a free quote on your bond as well as details on how to complete your application.
Your bond will be issued within two days of receiving your final application. We will then forward it to you via email and standard mail.
Call us at (866)-450-3412 for any questions you have about these bonds or if you need assistance with your application!