Public Works Bond

What Are Public Works Bonds?

Public works bonds are a type of contract bonds. Public project owners often require construction specialists to post such bonds when being awarded a contract for executing public works.

Typically, public works bonds refer to payment bonds. Their purpose is to guarantee that the main contractor on a public project will make all due payments to subcontractors, suppliers, workers and any others partners for the services and materials they have provided.

In some cases, performance bonds may also be required in relation to public works projects. They guarantee that contractors will execute all conditions that they have committed to in the contract, thus ensuring duly and timely completion of projects.

Public works bonds function just like the rest of surety bonds. They are, in essence, a contractual agreement between three parties. Your contractorship is the principal that needs the bond. The public authority that requires the bonding is the obligee. The third entity is the surety, which provides the bonds and backs your business.

Public works bonds are required in most states. Below you can find more details about requirements in some of them.

Kansas

For public projects above $100,000, contractors in Kansas should post a payment bond. The minimum bond amount should be the total contract sum.

Michigan

Michigan contractors have to post performance and payment bonds for public projects above $50,000. The bond amounts should be more than 25% of the contract sum.

Oregon

Contractors in the state who want to work on public projects above $100,000 have to get payment bonds. The bond amount of the Oregon BOLI bond is set at $30,000.

Texas

For municipality or joint board projects created under Transportation the Code that are above $50,000, as well as any other public projects above $25,000, contractors need to post payment bonds. Performance bonds are needed for projects above $100,000. The bond amount is equal to the contract amount.

New Jersey

State Division of Building and Construction projects above $200,000 require contractors to obtain public works bonds. For all other state departments, bonds are needed for projects above $100,000.

Washington

For projects below $35,000, a 50% retainage may be usedinstead of a bond. For projects between $35,000 and $100,000, individual sureties may be used instead. If a project is $100,000, however, a public works bond is obligatory. The bond amount is equal to the contract amount.

Questions about Public Works Bond