What are They?
- Payment bonds guarantee payment of subcontractors, laborers, and suppliers.
- Performance bonds guarantee completion of the contract in accordance with all specifications, terms, and conditions.
A payment and performance bond combines both forms of protection in a single bond—though payment bonds and performance bonds can also be purchased separately. These bonds offer financial protection for project owners, assuring project owners that their completed projects will be free of all liens.
Who Needs them?
- Federal projects. Texas contractors selected for federally funded public works projects valued in excess of $100,000 are required to purchase payment and performance bonds.
- State-funded projects. The Texas Little Miller Act also requires a payment bond for state-funded projects valued over $25,000. A performance bond is required for projects valued over $100,000.
- Private projects. Owners of private construction projects of any size can require payment and performance bonds.