Blog Posts Categorized: Contractors

If you bid government work, you will run into bond requirements early, often before the bid is even opened. Bonds on public construction projects come from statute: the federal Miller Act for federal jobs and a state “Little Miller Act” for state and local jobs. Knowing how those laws work helps you read a solicitation, line up your surety and avoid a bid that gets thrown out over paperwork.

This guide covers why public owners require bonds, what the Miller Act says, how state versions differ and how to prepare before you bid. For the bonds themselves, see the Single Source Surety contractor and construction bonds page.

Why do governments require bonds on public construction projects?

Public property generally cannot be subject to a mechanics’ lien, so subcontractors and suppliers on a government job lose the usual way to secure payment. Payment bonds replace that lien right. Performance bonds protect the public owner, and the taxpayer money behind the contract, if the contractor fails to finish the work.

On a private job, an unpaid supplier can usually file a lien against the property. A courthouse or a highway bridge is different. The government owns it, and private parties generally cannot encumber it. Without a substitute, the people furthest down the payment chain would carry the most risk.

Bonding statutes solve that by moving the risk to a surety. The public owner gets a performance bond backing completion of the contract. Subcontractors, laborers and suppliers get a payment bond they can claim against if the prime contractor does not pay them. Bid bonds, covered below, protect the owner during the bidding stage.

There is also a screening effect. A surety will not write a bond for a contractor it does not believe can perform, so bonds on public construction projects give the owner an outside review of each bidder before award.

The Miller Act: federal bonds on public construction projects

The Miller Act, codified at 40 U.S.C. 3131 through 3134, governs bonds on federal construction contracts. It applies to contracts “for the construction, alteration, or repair of any public building or public work of the Federal Government” above the threshold set in the statute and the Federal Acquisition Regulation (FAR Part 28). Smaller federal contracts can carry their own payment protection rules, which the solicitation will spell out.

For covered contracts, the statute requires two bonds before award, and it says they “become binding when the contract is awarded”:

• A performance bond “with a surety satisfactory to the officer awarding the contract,” in an amount the contracting officer considers adequate “for the protection of the Government.”
• A payment bond “for the protection of all persons supplying labor and material in carrying out the work provided for in the contract.”

On federal jobs, bond amounts and acceptable forms of security come from the statute, the FAR and the contract documents. The solicitation will state the required bonds, the penal sums and the forms to use. You can learn more about each instrument on the performance bond page and the payment bond page.

Who can claim on a Miller Act payment bond?

The Miller Act payment bond protects people who furnished labor or material for the work. Subcontractors and suppliers with a direct contract with the prime contractor can claim, and so can those with a direct contract with a subcontractor. Each group has different notice and timing rules under 40 U.S.C. 3133.

The statute’s language describes two groups. A party with a direct contract with the prime contractor may sue on the bond if it “has not been paid in full within 90 days after the day on which” it last performed labor or supplied material. A party with “a direct contractual relationship with a subcontractor but no contractual relationship” with the prime must first give written notice to the contractor “within 90 days from the date on which the person did or performed” the last of the labor or furnished the last of the material. Parties further down the chain should ask counsel whether they are covered at all.

Notice and filing deadlines

Timing matters a great deal on federal bond claims. Under 40 U.S.C. 3133, a civil action on the payment bond “must be brought no later than one year after the day on which the last of the labor was performed or material was supplied by the person bringing the action.” The statute also addresses how notice is served and where suit is filed, so read it in full. A claim filed late can be lost regardless of its merits.

Subs and suppliers should track their own last date of work and act well before any window closes. Prime contractors should keep records showing when each party last worked on the job.

What are Little Miller Acts?

Little Miller Acts are state laws that require bonds on public construction projects funded by states, local governments and other public bodies. They follow the federal model, with a performance bond for the owner and a payment bond for subs and suppliers, but each state writes its own thresholds, claim rules and deadlines.

Every state has its own version, and they do not line up neatly. Points that commonly differ include:

• the contract size at which bonds become mandatory
• the required bond amounts and whether a local agency can waive or reduce them
• which tiers of subcontractors and suppliers can claim on the payment bond
• the notice a claimant must give, to whom and by when
• the deadline for filing suit on the bond
• whether the bond must be recorded or filed before work starts

Florida is one example. Under Florida Statutes section 255.05, a contractor on a covered public building or public work must furnish “a payment and performance bond with a surety insurer authorized to do business in this state,” and the bond must be recorded in the county public records before work begins. Florida’s statute also sets its own exemptions, notice rules and time limits, which differ from the federal ones.

Rules for bonds on public construction projects in one state do not carry over to the next. For any public job, check two sources: the state statute that governs public works bonds, and the bid documents for the project. Local agencies sometimes add requirements of their own through the contract, and the contract is what you will be held to.

Bid bonds on public bids

Most public solicitations that require performance and payment bonds also require a bid guarantee, often in the form of a bid bond. It backs your promise that, if you are the selected bidder, you will sign the contract and furnish the required bonds. If you walk away, the owner can look to the bid guarantee.

The solicitation states the required amount, the acceptable forms of guarantee and any specific bond form. A missing, unsigned or nonconforming bid bond is a common reason public bids are rejected as nonresponsive, so treat it as part of the bid package rather than an afterthought.

Because the surety issuing the bid bond is signaling it expects to write the final bonds if you win, the bid bond is usually where underwriting really starts. For a walkthrough of how the bid, performance and payment bonds connect on a single job, see the bid-to-payment bond process guide.

How to prepare for bonds on public construction projects

Getting ready for bonds on public construction projects starts before the solicitation comes out. Public owners rarely extend a bid deadline because a bond was late.

Check prequalification rules

Some state transportation departments and other public owners require contractors to prequalify before they can bid certain work. Prequalification often looks at financial statements, experience and equipment, and it can take time. Find out early whether the agencies you want to work for use it.

Know your bonding capacity

Your surety sets limits on the size of a single job and the total backlog it will support. Before you commit to a bid, confirm the project fits within those limits. If you are trying to move into larger public work, the guide to increasing surety bond capacity for public contracts covers that side in detail.

Have your underwriting file ready

Contract bond underwriting is more detailed than for most license bonds. A surety will typically want:

• business and personal financial statements, often CPA-prepared for larger programs
• a current work-in-progress schedule
• a list of completed projects and references
• bank and credit information
• the bid documents for the specific project

Owners of the business are usually asked to sign a general indemnity agreement. Premium, any collateral and the terms offered depend on the job size, your financial strength, your experience with similar work and the contract terms.

Read the bond forms in the solicitation

Federal agencies use standard forms, and many states and localities require their own. Make sure the obligee name, contract number, penal sums and signatures match what the bid documents ask for.

Frequently asked questions

Does the Miller Act apply to state and local projects?

No. The Miller Act covers federal construction contracts. State, county and city projects fall under the state’s Little Miller Act and the agency’s own contract requirements.

Are Miller Act bonds required on every federal contract?

No. Performance and payment bonds are required on construction contracts above the threshold set in the statute and the Federal Acquisition Regulation. Smaller contracts may use alternative payment protections. The solicitation will state what is required.

Can a subcontractor file a mechanics’ lien on a public project?

Generally not, because public property is usually exempt from liens. That is why the payment bond exists. Unpaid subs and suppliers typically make a claim against the bond instead, following the notice and filing rules in the governing statute.

Does every state have a Little Miller Act?

Every state has its own law requiring bonds on public construction projects above certain thresholds. The details vary widely, including thresholds, who can claim and deadlines, so check the statute for the state where the project is located.

Who is protected by a performance bond versus a payment bond?

The performance bond protects the public owner if the contractor does not complete the work under the contract. The payment bond protects subcontractors, laborers and suppliers who are not paid for labor or material they furnished.

How long does it take to get bonded for a public project?

It depends on whether you already have a surety relationship and how complete your financial file is. A contractor with an established program may move quickly; a first-time applicant should start well before the bid date.

Get bonded for your next public bid

Before you bid, pull the requirements for bonds on public construction projects from the solicitation, check the federal or state statute that applies, and confirm the job fits your surety program. When you are ready, visit the Single Source Surety contractor and construction bonds page to request bid, performance and payment bonds for public work.

This article is general information, not legal advice. Bond requirements, claim rules and deadlines vary by statute, agency and contract; the governing law and your bid documents control.

Florida construction bonds are always required by a specific party: a public agency, a private owner, a lender or a local building department. Knowing who is asking, and under what rule, tells you which bond to line up and when.

This guide sorts the common Florida construction bonds by who requires them. It is general information, and the bid documents, contract or local ordinance on your job always control. For bond options and to apply, see the Florida construction bonds page.

The main Florida construction bonds at a glance

Most Florida construction bonds fall into two groups. Contract bonds tie to a particular project. License and permit bonds tie to the contractor’s right to work in a jurisdiction.

If you want the general mechanics of how these bonds connect over a project’s life, this explainer covers how bid, performance and payment bonds work together. The rest of this article stays focused on Florida rules and the parties that impose them.

Public works: Florida construction bonds under s. 255.05

Florida’s public-works bond law is section 255.05, Florida Statutes, sometimes called Florida’s “Little Miller Act.” It applies when a contractor enters a formal contract with the state, a county, a city, another political subdivision or public authority for the construction of a public building or public work, or for repairs to one.

On those contracts, the statute requires the contractor to furnish a payment and performance bond written by a surety insurer authorized to do business in Florida, before work begins. A few points from the statute matter in practice:

• Recording. The contractor must record the bond in the public records of the county where the improvement is located and give the public entity a certified copy before starting work.
• Thresholds and exemptions. Smaller contracts can fall outside the requirement. State contracts below the threshold in s. 255.05 do not require the bond, and other public bodies have discretion to exempt contracts below a separate threshold. Read the statute for the current figures and confirm with the awarding agency.
• Alternative security. The statute lets a contractor file certain alternative forms of security, such as cash or a certified check, in place of the bond. In practice most contractors use a surety bond so they do not tie up working capital.

Transportation work has its own statute. Florida Department of Transportation contracts fall under section 337.18, which requires a surety bond from the successful bidder covering performance and payment, with limited waivers the department can grant. For more on the performance side, see Florida performance bonds.

Who requires a bid bond?

A bid bond is required by the project owner that issues the solicitation, most often a public agency such as a state department, county, city, school district or utility. The requirement appears in the invitation to bid or bid documents. Some private owners and general contractors also ask for bid bonds from bidders or subcontractors.

Florida law sets the payment and performance bond on public work, but the bid security on a given job is usually spelled out in the solicitation itself. That document typically states whether a bid bond is required, the amount or percentage of the bid it must cover, whether cash or a certified check is accepted instead, and whether a specific bond form must be used. If the bid security is missing or wrong, the agency can reject the bid.

The bid bond backs a simple promise. If you are the selected bidder, you will sign the contract and furnish the performance and payment bonds the contract requires. If you walk away, the owner can make a claim against the bid bond. Because the surety is effectively pre-approving you for the final bonds, underwriting for a bid bond looks at the same capacity questions as the performance bond that would follow. More on that product is on the Florida bid bonds page.

Private projects: owners, lenders and s. 713.23

Florida’s bond statutes generally do not require a performance bond on an ordinary private project. On private work, Florida construction bonds usually come from the contract. The usual sources are:

• The owner or developer, who writes bond requirements into the prime contract to protect against non-completion.
• The construction lender, which may make performance and payment bonds a condition of funding.
• The general contractor, who may require subcontract bonds from major trade contractors.

Payment bonds on private work have a statutory hook. Under section 713.23, Florida Statutes, an owner can use a payment bond furnished by the contractor to exempt itself under Florida’s construction lien law. The bond must be in at least the amount of the original contract price, and a copy is attached to the notice of commencement when that notice is recorded. Subcontractors and suppliers then look to the bond, rather than a lien on the property, for payment, and the statute sets notice requirements they must follow to recover.

That is why some private owners and lenders ask for a payment bond even when they are comfortable with the contractor’s ability to finish. It keeps the property clear of liens from lower-tier parties. If your private contract mentions s. 713.23, have the contract and bond form reviewed so the bond meets the statute’s terms.

Florida contractor license and permit bonds

State certification through the Construction Industry Licensing Board, part of the Florida Department of Business and Professional Regulation, focuses on exams, experience, insurance and financial responsibility. There is no general license bond that every state-certified contractor must post simply to hold a license. The board’s financial stability rules can involve a bond or letter of credit for some applicants who do not meet its credit standards, so check the current requirements with DBPR if that applies to you.

Local rules are where license and permit bonds tend to show up. Some Florida counties and cities require a bond before they issue a local certificate of competency, register a contractor or issue permits. Orange County, for example, requires a contractor performance bond filed with its Division of Building Safety, executed in the name of the license holder. Requirements, bond forms and amounts differ from place to place, and they change. Check with the county or city building department where you plan to pull permits.

Single Source Surety’s Florida contractor bonds page covers these local license and permit bonds, which sit alongside the project-based Florida construction bonds above.

Maintenance bonds required by some counties and owners

A maintenance bond backs the contractor’s obligation to fix defects in materials or workmanship for a stated period after the work is accepted. In Florida, they often come up on subdivision improvements, roadway and right-of-way work, and utility installations that a county or city will take over once complete. Some public owners require one as a condition of accepting the work, and some private owners include one in the contract.

The length of the maintenance period, the bond amount and the form are set by the local ordinance, development order or contract. Ask the obligee for those details before you request the bond so it matches what they will accept.

How to find out which bonds your Florida job needs

Each project sets its own Florida construction bond requirements, so the answer is in the documents and with the party requiring the bond, which is called the obligee. Work through these steps before you bid or sign:

1. Read the bid documents. The invitation to bid, instructions to bidders and general conditions usually list every bond, its amount and the required form.
2. Read the contract. On private jobs, the bond requirements may sit in the prime contract, a lender’s loan agreement or a subcontract.
3. Check whether a statute applies. Public building and public works contracts fall under s. 255.05; FDOT work falls under s. 337.18; private payment bonds used to avoid liens fall under s. 713.23.
4. Check local rules. Ask the county or city building department about license, permit or maintenance bonds before you pull permits.
5. Ask the obligee directly. Confirm the exact obligee name, the bond amount, any required form, and whether the bond must be recorded or filed.
6. Talk to your surety early. Bonds on large jobs require underwriting, and having financial statements and work-in-progress schedules ready speeds that up.

Frequently asked questions

Do Florida contractors need to be bonded?

It depends on the job and the jurisdiction. Public building and public works contracts generally require payment and performance bonds under s. 255.05. Private owners and lenders may require bonds by contract. Some counties and cities require license or permit bonds. Check each project and each local building department.

Can I use cash instead of a bond on Florida public work?

Section 255.05 allows certain alternative forms of security, such as cash or a certified check, in place of the payment and performance bond. Bid documents may set their own rules for bid security. Most contractors use surety bonds to keep working capital free.

What is the Florida Little Miller Act?

It is the common name for s. 255.05, Florida Statutes. It requires contractors on qualifying public building and public works contracts to furnish and record a payment and performance bond from a surety authorized in Florida.

Is a payment bond required on private projects in Florida?

Not by default. A private owner or lender may require one by contract, and an owner can use a payment bond under s. 713.23 as an alternative to the lien process, with subcontractors and suppliers making claims against the bond.

Does the State of Florida require a contractor license bond?

State certification does not carry a general license bond for every contractor, though the licensing board’s financial stability rules can involve a bond for some applicants. Many local jurisdictions have their own bond requirements, so check with your county or city.

How do I know what bond amount I need?

The obligee sets the amount for Florida construction bonds. Public bonds follow the statute and the bid documents, private bonds follow the contract, and local bonds follow the ordinance. Confirm the amount and form with the party requiring the bond.

Get the bonds your Florida project requires

Once you know which bonds the job calls for and who the obligee is, gather the bid documents or contract, the required bond forms and your financial information. Then visit the Single Source Surety Florida construction bonds page to request bid, performance, payment or maintenance bonds for your project.

This article is general information, not legal advice. Bond requirements vary by project, agency and local jurisdiction; the governing statute, contract and bid documents control.

Most construction contracts that call for bonding call for more than one. Bid, performance and payment bonds are the three contract bonds a general contractor meets most often, and they follow the job in order: one backs your bid, the other two back the contract after award. Each protects a different party against a different risk, and a surety writes all three after reviewing the same contractor file.

This guide explains what each bond does, who it protects, how the three fit together from bid day to closeout, and how sureties decide how much work they will back. For the full range of bonds contractors carry, see the Single Source Surety contractor and construction bonds page.

What are bid, performance and payment bonds?

Bid, performance and payment bonds are contract surety bonds used on construction projects. A bid bond backs a contractor’s promise to sign the contract and provide final bonds if it wins. A performance bond backs completion of the work under the contract. A payment bond backs payment to the subcontractors and suppliers on the job.

Each bond has three parties. The principal is the contractor. The obligee is the party the bond protects, usually the project owner, or the general contractor on a subcontract bond. The surety issues the bond and backs the principal’s obligation. A bond is not insurance for the contractor: if the surety pays a valid claim, it expects repayment under the indemnity agreement the contractor signed.

Bid bond

A bid bond is submitted with the bid. It tells the owner that if your bid is accepted, you will sign the contract at your bid price and furnish the required final bonds. The bond amount is usually a percentage of the bid set in the bid documents. If the winning bidder backs out, the owner can claim on the bid bond, often for its added cost of awarding the work to the next bidder, up to the bond amount and subject to the bond form.

Performance bond

A performance bond is delivered after award, before work starts. It protects the owner if the contractor fails to complete the work according to the contract, plans and specifications. The bond amount is normally tied to the contract price, and it typically follows approved change orders that increase the contract, subject to the bond form.

Payment bond

A payment bond is usually issued alongside the performance bond. It protects the people who supply labor and materials to the project: subcontractors, sub-subcontractors, suppliers and, on many jobs, laborers. Liens generally cannot attach to public property, so on public work the payment bond is their main path to payment. On private work, it can help keep liens off the owner’s property.

How do bid, performance and payment bonds work together?

The three bonds form a chain. The bid bond commits the low bidder to sign the contract and deliver performance and payment bonds. Those final bonds then cover the life of the contract: the performance bond protects the owner’s project, and the payment bond protects the subcontractors and suppliers who build it.

On a typical bonded job, the sequence looks like this:

1. Prequalification. Before you bid, the surety reviews your company and sets the size of job it will back.
2. Bid. You request a bid bond for the specific project, in the amount and form the bid documents call for, and submit it with your bid.
3. Award. The owner issues a notice of award and sends the contract for signature.
4. Final bonds. The surety issues the performance and payment bonds, usually on the owner’s required form.
5. Construction. The bonds stay in force while the work is underway. Keep your surety informed of large change orders.
6. Completion and closeout. After final acceptance and payment, the owner’s release and any claim periods allowed by the contract or law close out the bond obligation.
7. Maintenance period. If the contract requires it, a maintenance bond covers the warranty period after completion.

Because a surety that writes your bid bond generally expects to write the final bonds if you win, it reviews the job before issuing the bid bond, not after. That is the practical link between bid, performance and payment bonds: one underwriting decision covers all three.

Bid bond vs performance bond: what is the difference?

A bid bond covers the bidding stage and ends once the winner signs the contract and delivers final bonds. A performance bond covers the construction stage and protects the owner if the contractor does not finish the work. The bid bond is a smaller commitment; the performance bond backs the whole contract.

The payment bond is the one most often confused with the performance bond. Both are issued at award and run for the life of the contract, but they protect different people. The performance bond answers the owner’s question, “Will this project get built?” The payment bond answers the subcontractor’s and supplier’s question, “Will I get paid for what I put into it?” Owners often require both, because a finished project can still leave unpaid bills behind.

What happens when a claim is made on a construction bond?

When a claim is made, the surety investigates before it pays. It reviews the bond, the contract and the facts from both the claimant and the contractor. If the claim is valid, the surety resolves it under the bond’s terms and then looks to the contractor and any indemnitors to repay what it spent.

The details depend on the bond type and form:

• Bid bond claims usually arise when a low bidder refuses to sign or cannot furnish final bonds.
• Performance bond claims generally start with the owner declaring the contractor in default under the contract. Depending on the bond form and the situation, a surety may consider options such as financing the original contractor to finish, arranging for a completion contractor, letting the owner complete and paying covered costs, or denying the claim if it has a valid defense.
• Payment bond claims come from unpaid subcontractors and suppliers. Claimants usually must give written notice and file within time limits set by the bond and the applicable law, so anyone relying on a payment bond should read it early in the job.

Each path ends with the contractor’s indemnity obligation, and a paid claim can make future bonding harder.

How sureties decide on bid, performance and payment bonds

Contract bonds are underwritten more like credit than insurance. The surety is betting that you will finish the work and pay your bills, so it studies your company before it backs a job. Underwriters often describe the review as three Cs.

• Character. Your reputation with owners, subcontractors and suppliers, how you handle disputes, and the experience and integrity of the people running the company.
• Capacity. Your people, equipment, systems and track record on work of the type and size you are bidding, plus the work you already have in progress.
• Capital. Your financial strength: working capital, net worth, cash flow, debt, bank relationships and the quality of your financial statements.

Expect requests for company and personal financial statements, a work-in-progress schedule, completed-project history, bank references and details on the job you want to bid. Larger programs usually call for CPA-prepared statements.

The result is your bonding capacity, usually expressed as two limits: the largest single job the surety will bond and the total amount of bonded work it will allow you to carry at once. Both tend to grow as your finances strengthen and your record of completed bonded work gets longer. The guide to increasing your surety bond capacity covers that growth in detail. If credit is a concern, read about surety bonds with bad credit; it is one factor in the review, not the only one.

The premium for performance and payment bonds depends on the contract amount and the surety’s view of your risk. Ask how pricing works for your account before you bid, so the bond cost is built into your number.

Maintenance bonds after completion

Some contracts require a maintenance bond that runs for a set warranty period after the project is accepted. It protects the owner if covered defects in workmanship or materials show up during that period and the contractor does not correct them. Some contracts fold this obligation into the performance bond instead. The contract documents say which applies.

Where are bid, performance and payment bonds required?

Bonds are most often required on public construction. Federal, state and local governments generally require performance and payment bonds on contracts above set thresholds, and bid bonds or other bid security when bonds will be required. Private owners and lenders may also require them by contract. Rules vary by state and agency.

On federal projects, the requirement comes from the statute long known as the Miller Act, now codified at 40 U.S.C. 3131, and implemented through FAR 28.102-1, which sets the current contract threshold. Most states have their own versions, often called “Little Miller Acts,” for state and local public work. For more on how these requirements apply to public jobs, read the importance of contractor bonds in public construction projects.

Small contractors who have trouble qualifying for bonding through the standard market may be eligible for the U.S. Small Business Administration’s surety bond guarantee program, which supports bid, performance, payment and maintenance bonds issued by participating sureties.

Frequently asked questions

Do I need a performance bond if I have a bid bond?

Usually, yes. The bid bond only covers the bidding stage. If you win a job that requires final bonds, you must furnish the performance and payment bonds the contract calls for. Failing to provide them is one of the most common reasons a bid bond claim is made.

Who pays for a payment bond?

The contractor buys the bond, and the cost is generally built into the bid price. The bond protects subcontractors and suppliers, but they do not pay for it, and they are not the surety’s customer.

Can a subcontractor claim on a performance bond?

Generally, no. The performance bond protects the owner named as obligee. Subcontractors and suppliers who have not been paid normally look to the payment bond. A general contractor can require its own subcontractors to provide performance and payment bonds naming the general contractor as obligee.

Are performance and payment bonds always issued together?

On public work they usually are, because the law often requires both. On private projects the owner or lender decides. Some private owners ask for only a performance bond, and some ask for both. The contract documents control.

How long does a performance bond last?

Generally until the work is complete and accepted and any claim periods in the bond or contract have run. Warranty obligations may extend it or call for a separate maintenance bond.

Get your next bonded job lined up

Bid, performance and payment bonds come from one surety relationship, so set it up before the bid you want is advertised. Gather your financial statements, work-in-progress schedule and job history, then visit the Single Source Surety contractor and construction bonds page to start a bid, performance or payment bond request.

This article is general information, not legal advice. Bond requirements, claim procedures and deadlines vary by state, agency and contract; the bond form and contract documents control.