A payment bond guarantees that subcontractors, suppliers, and laborers will be paid for their work and materials on a bonded project. When a general contractor fails to pay the trades, the surety satisfies valid claims, protecting the supply chain and keeping projects moving.
Payment bonds are a critical backstop in the construction industry. They eliminate the most common cause of project delays and disputes: unpaid subcontractors. For owners, they reduce lien exposure. For subcontractors and suppliers, they provide payment security regardless of the GC’s financial position.
We issue payment bonds across all licensed states: Arizona, California, Georgia, Louisiana, Michigan, New Mexico, New York, Pennsylvania, Texas, Utah, and Virginia.
Payment bonds we almost always issue together with performance bonds as a P&P Bond package. When issued together, a single premium covers both bonds, making the combined cost more economical than purchasing them separately.
A P&P Bond package usually costs 1% to 3% of the contract value for qualified contractors. A $1,000,000 project with a 2% rate yields a combined payment and performance bond premium of $20,000.
The Miller Act requires payment bonds on all federal construction contracts exceeding $150,000. Virtually every state has enacted a comparable law, referred to collectively as ‘Little Miller Acts’, requiring payment bonds on state and local public projects. Minimum thresholds vary by state, ranging from $25,000 to $150,000.
Private project owners increasingly require payment bonds to prevent mechanics’ liens, ensure clean project financing, and protect their investment from subcontractor payment disputes.
If a payment bond claim is filed against your bond, the surety will investigate. Valid claims are paid, and then the surety seeks full reimbursement from you as the principal. This is the fundamental difference between a bond and insurance: the contractor carries ultimate financial responsibility.
To protect against double-payment risk, require bonds from subcontractors for your own subcontracted work. This ensures you are not liable twice if a sub fails to pay its own suppliers.
A payment bond guarantees that subcontractors, suppliers, and laborers on a bonded project will be paid. If the GC fails to pay, the surety covers valid claims up to the bond amount.
Yes, on federal projects over $150,000 (Miller Act) and on most state public projects under the Little Miller Act statutes. Many private owners and lenders also require them.
Payment bonds we almost always package with performance bonds. Combined P&P bond premiums typically range from 1%–3% of the contract value for qualified contractors.
Yes. Subcontractors, suppliers, and laborers who are unpaid on a bonded project have the right to file a claim against the payment bond within specific timeframes defined by law.
On public projects, mechanics’ liens against government property are usually prohibited. The payment bond is the remedy for unpaid subcontractors and suppliers, rather than a lien.
