Payment and Performance Bond

Protecting Project Obligations

Construction projects involve financial and contractual responsibilities for owners, contractors, subcontractors, and suppliers. A payment and performance bond can provide financial guarantees connected to a contractor’s obligations under a construction contract.

A performance bond generally relates to completing the contracted work, while a payment bond is intended to address certain payment obligations to eligible subcontractors and suppliers. The exact protections depend on the bond wording, contract, and applicable requirements.

Understanding Performance and Payment Bonds

A performance and payment bond combines these two types of surety protection for qualifying construction projects. Project owners may require bonding to provide additional assurance that contractual obligations will be addressed.

Pascal Burke Insurance Brokerage can help contractors understand the bonding requirements and information typically needed for underwriting. This may include contract details, project value, business history, financial information, and the contractor’s experience.

Construction Payment Bond Requirements

A construction payment bond can be required on certain construction projects to provide a mechanism for addressing eligible payment claims from subcontractors and suppliers. Requirements can differ depending on the project, contract, jurisdiction, and whether the project is public or private.

For payment bonds on private construction projects, the requirements are generally established through the construction contract and applicable state law. Reviewing the bonding requirements before signing a contract can help contractors understand what will be expected.

Understanding Bond Costs

The payment and performance bond cost​ can vary based on factors such as the contract amount, project type, contractor qualifications, financial strength, experience, and the surety’s underwriting requirements.

Pascal Burke Insurance Brokerage can help contractors review their bonding needs and explore available options. Whether you need a payment bond, performance bond, or combined payment and performance bond, our team can help you understand the process.