Surety bonds play a critical role in keeping construction projects on track—especially when public funding is involved. Federal, state, and local regulations often require contractors to secure specific bonds before work can begin, making it essential to understand what’s needed for each project.
Public Project Bonding Requirements
The federal Miller Act mandates that general contractors provide performance and payment bonds for any federally funded construction contract exceeding $150,000. Many states, including Michigan, enforce similar statutes known as “Little Miller Acts.” These laws require performance and payment bonds for state-funded construction projects. Requirements vary by jurisdiction, so contractors must review bonding rules for the location where the project will be completed.
Local municipalities may also require subdivision bonds to guarantee infrastructure improvements—such as streets, utilities, and sidewalks—before they approve development permits.
Private Project Bonding
For privately funded projects, bond requirements are determined by the owner. Some owners require surety bonds to reduce risk or screen out contractors without strong qualifications. Contractors should understand that projects requiring bonds typically include higher bid prices to account for the cost and effort of obtaining the bond.
Prime contractors may also require subcontractors and suppliers to carry surety bonds. This protects the contractor’s financial interest by ensuring work and materials are delivered as agreed.
How to Obtain a Construction Surety Bond
Securing a surety bond begins with identifying the type and amount of coverage required. Most prime contractors need a combination of bid bonds, performance bonds, and payment bonds.
Once requirements are clear, contractors should partner with a surety provider experienced in construction bonding. Many sureties offer online resources and quotes, helping businesses compare options based on location, project type, and company profile.
The surety will then conduct underwriting to evaluate risk. This review often includes:
- Company financial strength
- Experience and project history
- Organizational structure and management practices
- Personal character and reliability of the principal
Bond premiums are determined by this risk assessment—lower risk results in lower costs. After approval, the contractor files the bond with the obligee and can move forward with construction.
Construction Bonding Specialists partners with Treasury-listed, AM Best–rated surety markets to meet nearly all bid, performance, payment, financial guarantee, and supply bond needs. Contact us today.
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At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a dedicated surety-bond-only agency with decades of bonding experience, we strive to discover surety solutions for all types of cases, ranging from routine to challenging. Contact us online or call us at 248-349-6227 to learn more.
Written by the Digital Marketing Team at Creative Programs & Systems: https://www.cpsmi.com/.