Bonding is the most common reason small contractors say they can't bid government work. Often it isn't actually a barrier: many small federal jobs need no bond at all, and getting a first bid bond is easier than most people expect.
Three kinds of bonds
| Bid bond | Submitted with your bid. Promises that if you win, you'll sign the contract and provide the other bonds. If you walk away, the surety pays the owner (usually the difference between your price and the next bidder's), and you owe the surety. |
|---|---|
| Performance bond | After award. Guarantees you'll finish the work as contracted. |
| Payment bond | After award. Guarantees your subcontractors and suppliers get paid. |
When federal jobs require them
- Performance and payment bonds are required on federal construction contracts over $150,000 (the Miller Act).
- Bid bonds (the federal term is "bid guarantee") are normally required whenever performance and payment bonds are. On federal jobs, the bid guarantee is usually 20% of your bid price, capped at $3 million.
- Under $150,000, bonds are usually not required, though a contracting officer can ask for alternative payment protection. Always check the solicitation: the SF-1442 and the instructions say whether a bid guarantee is required.
- State and local jobs set their own thresholds, often lower, with bid bonds commonly 5 to 10%.
What a bid bond costs
Many sureties issue bid bonds to established clients for little or nothing, because the real premium is charged on the performance and payment bonds if you win. Those usually cost a percentage of the contract value, depending on your credit and history. Get a quote from a surety agent before you bid so the cost is in your price.
What the surety looks at
- Your experience with similar jobs, and whether this job fits your size.
- Company and personal financial statements, credit and banking (larger jobs often need CPA-prepared statements).
- Your current backlog.
- For small first bonds, often just an application and a personal credit check.
How to get started
- Find a surety bond agent who works with small contractors. The NASBP Surety Pro Locator lists them by state.
- Ask for a bonding line before you need it: a single-job limit and a total (aggregate) limit.
- Start with jobs under $150,000 that need no bonds, and build past performance.
- Look into the SBA Surety Bond Guarantee program, which helps small firms that sureties would otherwise turn down.
Not bonded yet? Filter the open jobs board for smaller jobs in your trade and state.
Filling in the form itself? See the SF-24 bid bond, block by block, and SF-25 performance and payment bonds.