XL EaglePerformance bond
Performance bond. A performance bond guarantees that you will finish the contract according to its terms. If you default, the surety may finance you to finish, bring in another contractor, or pay the government up to the bond amount.
Under the Miller Act, federal construction contracts over $150,000 generally require both a performance bond and a payment bond, usually equal to 100 percent of the contract price. Agencies can also require performance bonds on some non-construction contracts.
Why it matters to a small contractor
If you are a sub on a federal construction job, your prime may ask you for your own performance bond so its surety is protected. Factor the bond premium into your price.
Example
A general contractor wins a federal building renovation and must deliver a performance bond and payment bond before notice to proceed. It requires its HVAC sub to provide a bond for the mechanical scope.
Performance bond: common questions
How much does a performance bond cost?
The premium is usually a small percentage of the contract value and depends on your financial strength and the surety's rates.
Do service contracts like janitorial need performance bonds?
Not usually, but some agencies require them. The solicitation will tell you.
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