Performance and payment bonds
A performance bond guarantees the contractor will finish the work as contracted; a payment bond guarantees that subcontractors and suppliers get paid.
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Definition
A performance bond guarantees the contractor will finish the work as contracted; a payment bond guarantees that subcontractors and suppliers get paid. Under the Miller Act, federal construction contracts over $150,000 require both. Most states have "Little Miller Act" laws with their own thresholds for state and local work.
How it differs
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vs. Bid bond
The bid bond is posted with the bid; performance and payment bonds are posted after award. What is Bid bond?
Related terms
Questions
What does "performance and payment bonds" mean in procurement?
A performance bond guarantees the contractor will finish the work as contracted; a payment bond guarantees that subcontractors and suppliers get paid. Under the Miller Act, federal construction contracts over $150,000 require both. Most states have "Little Miller Act" laws with their own thresholds for state and local work.
What is the difference between Performance and payment bonds and Bid bond?
The bid bond is posted with the bid; performance and payment bonds are posted after award.