The construction season is fast approaching, so those bidding on new jobs will need to make sure they have the appropriate contract bonds lined up to qualify for review. The process can be confusing, and unfortunately, some requests for proposal (RFP) contain vague language regarding the bond specifics. Those vying for government construction work and maintenance, often privatized jobs, will need a contract bond (or surety bond.)

Surety bonds are contracts between three parties: the principal, surety, and oblige. They provide a financial guarantee that one party will fulfill their legal, contractual obligations to another. A surety bond is more like a line of credit than insurance. Usually, construction contracts are completed to the satisfaction of all, where work expectations are met, and wages are paid out – the surety doesn’t need to get involved. If a disagreement occurs and the principal and the client (generally the oblige) can’t settle on a compromise, they can file a claim with the surety for financial compensation. The surety will investigate the claim, and if found legitimate, the surety will pay the claim in an amount up to the bond penalty.

A contract bond refers to several surety bond types. Below are the three most common contract bonds:

Bid Bonds: A bid bond is a prequalification indicating that the contractor is bondable for the performance and payment bond should they be read low or chosen by an Owner/GC/CM to enter into the contract and provide a Performance and Payment Bond.

Performance Bonds: Performance Bonds offer assurance that the bonded contractor will perform according to all contract documents.

Payment Bonds: Payment bonds assure that the bonded contractor pays for all materials and labor associated with the documents related to the contract.

Need help obtaining a contract bond? CBS will help you determine the RFP bond requirements in order to submit a bid and consequently win the contract. Contact us today for assistance.


At Construction Bonding Specialists, we work with new and experienced contractors to find the most satisfactory bond solutions. As a distinct surety-bond-only agency with decades of bonding experience, we work to discover surety solutions for all types of cases ranging from ordinary to challenging. Call us at 248-349-6227 or visit us at today.

Written by the digital marketing staff at Creative Programs & Systems:

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