First, what a contract bond is
A contract bond is a three-party promise. You, the contractor, are the principal. The project owner is the obligee. The surety is the company that backs your promise. If you do not keep it, the surety steps in, and you repay the surety for what it pays out.
That last part surprises people. A bond is not insurance for the contractor. It protects the owner and the people downstream of you. That is why sureties underwrite carefully. They are lending you their credit.
The bonds, in the order you meet them
| Stage | Bond | Guarantees |
|---|---|---|
| 1. Bidding | Bid bondUsually 5% of the bid | If you win, you will sign the contract and provide the final bonds |
| 2. Contract signing | Performance bondUsually 100% of the contract | You will finish the job to the plans and specs |
| 2. Contract signing | Payment bondUsually 100% of the contract | Your subs and suppliers will be paid |
| 3. After completion | Maintenance bondSet by the owner | You will fix defects during the warranty period |
The bid bond
The bid bond goes in with your bid. It tells the owner your price is real. If you are the low bidder and walk away from the award, the owner can claim on the bid bond, usually for the gap between your bid and the next one, up to the bond amount. On Georgia public work, bid security is generally at least 5% of the bid. Federal jobs require at least 20%.
The performance bond
When you sign the contract, the bid bond is replaced by the performance bond. It guarantees the work. If you default, the surety has options: finance you to finish, bring in another contractor, or pay the owner up to the bond amount.
The payment bond
The payment bond is signed alongside the performance bond. It guarantees your subcontractors and suppliers get paid. On public jobs this matters a lot, because subs and suppliers generally cannot put a lien on public property. The payment bond is their protection instead.
The maintenance bond
Some owners want a guarantee that lasts past completion. A maintenance bond covers repairs to defects in workmanship or materials for a set period, often one to two years. In Georgia you see it most when subdivision roads and utilities are turned over to a city or county. Sometimes the performance bond already includes a maintenance period.
Why bonding capacity matters
Your surety sets limits on how much work it will back: a single-job limit (the biggest one contract can be) and an aggregate limit (the total of all bonded work you have going). Those limits grow as your company grows. Credit carries smaller programs. Financial statements, a work-in-progress schedule and a track record of finished jobs carry larger ones.
The practical tip: set up your bonding program before you need it. A first bond request the night before a bid is stressful for everyone. Once you are approved, later bid bonds move quickly.
How Georgia law fits in
On Georgia public work, the owner type sets the rules. State agency jobs over $100,000 require performance and payment bonds. Local government jobs require them at $250,000 and up since July 1, 2025. Federal jobs over $150,000 require them under the Miller Act. Read the full breakdown in Georgia public works bonds after HB 137.
Common questions
Do I pay for the bid bond and the performance bond separately?
Many sureties charge little or nothing for bid bonds. The main premium is on the performance and payment bonds, which on our standard program is one 3% premium covering both.
Who keeps the bonds?
The owner keeps the originals with the signed contract. You keep copies.
What if I have a dispute with the owner?
The surety investigates any claim before paying. Talk to us early if a job is going sideways. There are often options before it becomes a claim.
Ready to set up your bonding program? Start a chat below, or see bid bonds and performance and payment bonds.
Sources: O.C.G.A. §§ 13-10-20, 13-10-40, 13-10-60, 36-91-22, 36-91-50, 36-91-70, 36-91-90; FAR 28.101-2, 28.102; Miller Act, 40 U.S.C. § 3131. This article is general information, not legal advice.