What a performance & payment bond is
Performance and payment bonds usually come as a pair once you win a job. Public owners require them on most public works over a set contract value, and many private owners and lenders ask for them too.
Performance bond
Guarantees you'll finish the work the way the contract says. If you default, the surety arranges for the work to be finished or pays the owner, up to the bond amount.
Payment bond
Guarantees your subcontractors, workers and suppliers get paid. On public jobs they can't put a lien on public property, so the payment bond is how they get paid if you don't pay them.
In District of Columbia
District of Columbia construction contracts over $100,000 need a performance bond and a payment bond, each for 100% of the contract price excluding operation, maintenance and finance costs, under D.C. Code § 2-357.02.
- The Chief Procurement Officer may reduce both bonds to 50% in some cases, or accept a letter of credit of at least 10% from eligible contractors.
- D.C. Code § 2-201.01 sets older bond rules for public building contracts over $25,000.
You need this bond if you're
- A general contractor awarded a public works contract
- A subcontractor whose subcontract requires bonding
- A contractor on a private job where the owner or lender requires bonds
- A design-builder or developer delivering public improvements
What the surety looks at
Your business, credit, experience and the contract itself. Larger contracts usually need financial statements, a work-in-progress schedule and bank references.