A performance bond is a type of contract surety bond that guarantees a contractor will complete a construction project in accordance with the contract's terms and conditions. If the contractor fails to perform — through default, abandonment, or inability to finish — the surety steps in to ensure the project is completed, either by financing the original contractor, hiring a replacement, or compensating the owner up to the bond amount.
When Is a Performance Bond Required?
Performance bonds are most commonly required on:
- Public works projects — In California, public projects over $25,000 typically require performance bonds.
- Federal projects — The federal Miller Act requires performance bonds on federal construction contracts exceeding $150,000.
- Private projects — Private owners and developers increasingly require performance bonds to protect their investment.
How Performance Bonds Work
A performance bond involves three parties:
- Principal — the contractor who purchases the bond and performs the work
- Obligee — the project owner protected by the bond
- Surety — the company that guarantees the contractor's performance
The bond amount is typically 100% of the contract value. Performance bonds are almost always issued alongside a payment bond, which guarantees payment to subcontractors and suppliers.
Bidding Bigger Projects?
Contractors who want to bid on larger public and private projects need a strong surety relationship. We help contractors build bonding capacity so you can pursue the jobs that grow your business.
How Contractors Qualify
Because a performance bond guarantees completion of the entire project, underwriting is more thorough than for a license bond. Surety companies evaluate what the industry calls the "three Cs":
- Capital — your financial strength and working capital
- Capacity — your ability to perform the work (experience, equipment, staff)
- Character — your reputation and track record
Well-prepared financial statements and a clear project history make a significant difference. As a former underwriter, our agency knows how to present your qualifications to secure approval and strong bonding capacity.
Why Work With Advanced Surety?
Contract surety is a specialized field. We work with A-rated surety companies that actively write construction bonds, and we understand what underwriters look for. Whether you're bonding your first project or expanding your capacity for larger jobs, we help you get there.