Performance Bonds
A performance bond guarantees that a contractor will complete a project according to the terms of the contract. Project owners, general contractors, and public agencies often require one before work can start, especially on public works. Pacific Southwest Insurance Services helps California contractors get performance bonds, payment bonds, and bid bonds, so you can bid on and win bigger jobs.
Get a free bond quote today. Call (818) 701-1033 or email info@pswinsurance.com. Office hours are Monday to Friday, 9:30 AM to 5:00 PM.
What Is a Performance Bond?
A performance bond is a three-party agreement between the contractor (the principal), the project owner (the obligee), and a surety company. If the contractor fails to perform the work as promised, the owner can make a claim on the bond, and the surety steps in to make it right, up to the bond amount. That can mean paying to finish the job or arranging for another contractor to complete it.
A performance bond is not insurance for the contractor. If the surety pays a claim, the contractor is expected to pay the surety back. That is why sureties review a contractor’s finances and experience before issuing a bond.
Performance, Payment, and Bid Bonds
Construction bonds usually come in a set. We can write all three:
- Bid bonds are submitted with your bid. They guarantee that if you win, you will sign the contract and provide the required performance and payment bonds.
- Performance bonds guarantee the work will be completed according to the contract.
- Payment bonds guarantee that your subcontractors, laborers, and suppliers will be paid. They are often issued together with the performance bond.
When Are Performance Bonds Required?
- Federal projects: the Miller Act requires performance and payment bonds on federal construction contracts over $150,000, generally for 100 percent of the contract price.
- California public works: California Civil Code section 9550 requires a payment bond on public works contracts over $25,000, and public agencies commonly require a performance bond as well. Check the bid documents for each project.
- Private projects: developers, property owners, and general contractors often require performance bonds from contractors and subcontractors, especially on larger jobs.
How Much Does a Performance Bond Cost?
You do not pay the full bond amount. You pay a premium that is a percentage of the contract amount. The rate depends on:
- The size and type of the project
- Your company’s financial statements and working capital
- Your experience with similar projects and your track record
- Personal credit of the owners
Contractors with strong financials and experience get the best rates. Newer contractors can often still get bonded on smaller jobs and build capacity over time. We compare options from multiple surety companies to find the right fit.
How to Get a Performance Bond
- Request a quote with your company information and CSLB license number.
- Send the project details, including the contract or bid amount and the bond form the owner requires.
- Underwriting: the surety reviews your financials and experience. Larger bonds may need financial statements and a work-in-progress schedule.
- Bond issued: once approved, you sign, pay the premium, and receive the bond to submit to the project owner.
Why Choose Pacific Southwest Insurance Services
We have helped California businesses since 1965. We work with contractors every day on bonds, general liability, commercial auto, and workers’ compensation, so we understand what owners and public agencies expect. We can also help with your CSLB license bonds, including the $100,000 LLC Employee/Worker Bond.
Frequently Asked Questions
What is the difference between a performance bond and a payment bond?
A performance bond protects the project owner by guaranteeing the work will be completed. A payment bond protects subcontractors, laborers, and suppliers by guaranteeing they will be paid. Many projects require both.
How long does it take to get a performance bond?
Smaller bonds for established contractors can often be issued quickly once we have the contract details. Larger bonds that require financial statements take longer, so contact us before the bid deadline.
Can a new contractor get a performance bond?
Often, yes, especially on smaller projects. The surety will look closely at personal credit, experience, and finances. We will help you find a surety that fits your situation.
Get a Performance Bond Quote
Bidding on a bonded job? Request a bond quote online, call (818) 701-1033, email info@pswinsurance.com, or visit our office at 9036 Reseda Blvd., Suite 105, Northridge, CA.
Sources: FAR 28.102-1 (Miller Act) and California Civil Code section 9550. Requirements can change; always check your contract and bid documents.