Win a federal construction job over $150,000 and, before you can start, you'll have to provide two bonds: a performance bond (SF-25) and a payment bond (SF-25A). They're required by the Miller Act (40 U.S.C. chapter 31, subchapter III) and FAR 28.102.
Free tool: Check your bond amounts with the free bid and performance bond calculator.
What each bond does
- Performance bond (SF-25): protects the government if you don't finish the job. The surety pays to complete it.
- Payment bond (SF-25A): protects your subcontractors and suppliers, who can't put a lien on federal property. If you don't pay them, they claim against this bond.
When they're required
| Construction over $150,000 | Performance and payment bonds are required (FAR 28.102-1(a)). |
|---|---|
| Construction over $35,000 up to $150,000 | The contracting officer picks two or more payment protections, such as a payment bond, an irrevocable letter of credit, or escrow (FAR 28.102-1(b)). |
| Services and supplies | Usually not required, unless the solicitation specifically asks. |
How much they cover
Normally the penal amount of each bond is 100% of the original contract price (FAR 28.102-2), and it increases if the contract price goes up through modifications, unless the solicitation sets a different amount. Your surety's premium is usually a small percentage of the contract value, depending on your finances and track record.
When they're due
The solicitation sets the deadline, typically a set number of days after award and always before the notice to proceed. Late bonds can delay your start or cost you the award, so tell your surety the moment you think you've won.
How a small contractor gets bonded
- Work with a surety bond agent who handles construction. Your insurance agent can refer you.
- Have ready: business and personal financial statements, tax returns, a work-in-progress schedule, a resume of past jobs and bank references.
- Ask for a bonding line: your single-job and total limits. Start with jobs well inside them.
- If you're turned down, look at the SBA Surety Bond Guarantee program, which guarantees bonds for small contractors that sureties would otherwise decline.
Frequently asked questions
Do I need a performance bond on a federal contract?
On construction contracts over $150,000, yes: both a performance bond and a payment bond. Smaller construction contracts need alternative payment protection from $35,000.
How much is the performance bond?
Usually 100% of the original contract price, for each of the two bonds.
What if I can't get bonded?
Try a surety agent who specializes in small contractors, and ask about the SBA Surety Bond Guarantee program. Meanwhile, bid jobs under $150,000.
Related
SF-24 bid bond · Bid bonds explained · Open construction contracts