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 Pennsylvania
Pennsylvania has two laws: the Commonwealth Procurement Code for state agency projects, and the Public Works Contractors' Bond Law of 1967 for other public bodies. Both require 100% performance and 100% payment bonds above set contract values.
- The dollar thresholds in 62 Pa.C.S. § 903 are adjusted each year by the Department of General Services using a construction cost index.
- Act 86 of 2020 amended the 1967 Bond Law and removed alternative forms of financial security.
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.