Construction Bonds Explained: Types, Cost & Requirements

Construction bonding has its own ecosystem — separate from the license bonds contractors carry to stay licensed. This guide covers all four contract bond types, how they fit together across a project’s lifecycle, what they cost, and the laws that require them.

This is distinct from the contractor license bond (which lets you hold a license). Construction bonds guarantee specific projects. For the basics, see what is a surety bond.

The Four Types of Construction Bonds

1. Bid Bonds

Submitted with your bid, a bid bond guarantees you’ll sign the contract at your bid price and provide the required performance and payment bonds if you win. Usually 5–20% of the bid (10% is common) and completely free with Bonds Express. See how to get a bid bond and the bid bonds page.

2. Performance Bonds

Issued after award, a performance bond guarantees you’ll complete the project according to the contract. If you default, the surety arranges completion or pays the cost up to the bond amount (usually 100% of the contract). See the performance bonds page.

3. Payment Bonds

Issued alongside the performance bond, a payment bond guarantees subcontractors, laborers, and suppliers get paid. Critical on public projects where mechanic’s liens aren’t allowed. See the payment bonds page, and the comparison in payment vs. performance bond.

4. Maintenance Bonds

Issued at project completion, a maintenance bond (or warranty bond) guarantees the contractor will fix workmanship or material defects during the warranty period — usually 1–2 years. Often included as an extension of the performance bond rather than priced separately.

How Construction Bonds Fit Together

Across a typical bonded project:

• Bid stage: submit the bid bond.
• Award: sign the contract; the bid bond’s job ends.
• Pre-construction: provide performance and payment bonds (usually together).
• Construction: performance and payment bonds stay in force.
• Completion: maintenance/warranty bond covers the defect period.

For the bid-to-performance handoff in detail, see bid vs. performance bond.

Laws That Require Construction Bonds

The federal Miller Act requires performance and payment bonds on federal construction contracts over $150,000. Most states have ‘Little Miller Acts’ imposing the same on state and municipal projects.

Private projects aren’t legally required to be bonded, but many owners and lenders require bonds anyway to protect their investment.

How Much Do Construction Bonds Cost?

Credit-challenged contractors can get bonded through specialty programs covering contracts up to $10 million — see Can I get a bid bond with bad credit?. For full pricing, see the surety bond cost guide.

How to Get Construction Bonds

1. 1. Get qualified. Submit an application and project manual, financials and a work-in-progress schedule to establish your bonding capacity.
2. 2. Bid with a bid bond. Submit your bid bond with the bid.
3. 3. Provide performance/payment bonds on award. Issued once you sign.
4. 4. Add maintenance bond at completion if the contract requires it.

Frequently Asked Questions

• What are construction bonds?
  Construction bonds (contract bonds) guarantee performance on building projects. The four main types are bid bonds (honor your bid), performance bonds (complete the project), payment bonds (pay subs and suppliers), and maintenance bonds (cover defects after completion). They protect project owners and the supply chain.
• What are the main types of construction bonds?
  Bid bonds, performance bonds, payment bonds, and maintenance bonds. The bid bond comes first; performance and payment bonds are issued after award and run during construction; the maintenance bond covers the warranty period after completion.
• How much do construction bonds cost?
  Bid bonds are usually free. Performance and payment bonds together cost about 3% of the contract value for qualified contractors, or 3–10% for hard-to-place contractors. Maintenance bonds are often included as an extension of the performance bond.
• Are construction bonds required by law?
  On public projects, yes. The federal Miller Act requires performance and payment bonds on federal contracts over $150,000, and most states require them on state and municipal projects under Little Miller Acts. Private projects aren’t legally required to be bonded but often are by owners or lenders.
• What is the difference between a license bond and a construction bond?
  A contractor license bond lets you hold a state contractor license and renews annually. Construction (contract) bonds — bid, performance, payment — guarantee specific projects and are issued per project. Contractors typically carry both: one to be licensed, others for individual jobs.
• Do private construction projects need bonds?
  Not by law, but many private owners and lenders require performance and payment bonds to protect their investment from contractor default and unpaid subcontractors. Whether bonds are required depends on the owner’s and lender’s requirements.
• Can I get construction bonds with bad credit?
  Yes, through specialty programs. BondsExpress runs bad-credit and hard-to-place contractor programs covering contracts up to $10 million, underwritten on the contractor’s track record and project specifics rather than credit alone.
• What is a maintenance bond?
  A maintenance bond (or warranty bond) guarantees the contractor will fix defects in workmanship or materials during the warranty period after project completion, usually 1–2 years. It’s often included as an extension of the performance bond rather than priced separately.

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