Backing You at Every Stage of the Job
Bid, Performance & Payment Bonds for Construction Projects
If you’re bidding on public projects or scaling into larger private work across Arizona, you’ll likely need
construction surety bonds—specifically
bid bonds, performance bonds, and payment bonds. These are not insurance in the traditional sense—they’re financial guarantees that help you qualify for jobs, give confidence to project owners, and ensure compliance with contract terms. And if you're a contractor working in places like Phoenix, Glendale, Tempe, or Chandler, many city and county jobs require these bonds as part of the bidding process.
Bid Bonds: A Contractor’s First Commitment
A
bid bond tells the project owner you’re serious. It guarantees that if your bid is selected, you’ll enter into the contract and furnish the required performance bond. If you back out, the surety pays the owner the difference to the next qualified bidder—often up to 10% of the contract amount. Arizona public projects nearly always require a bid bond for compliance. This is also the first step in forming a relationship with a surety, who evaluates your financials, experience, and current workload before backing your bids.
Performance Bonds: Completing the Job as Promised
Once awarded a contract, you’ll need a
performance bond to move forward. This bond guarantees that you’ll complete the work per the contract’s terms. If you default—due to bankruptcy, poor workmanship, or abandonment—the surety steps in to complete the job or compensate the project owner. In many cases, having a performance bond is what wins the job in the first place. It gives clients confidence that even if something goes wrong, they’re not left holding the bag.
Payment Bonds: Protecting Subs & Suppliers
Often issued alongside performance bonds, a
payment bond guarantees that you’ll pay your laborers, subcontractors, and suppliers. On public works projects (where liens aren’t allowed), this bond is essential—if a contractor fails to pay a sub, the sub can file a claim on the bond. Payment bonds protect everyone down the chain and help avoid legal battles over unpaid invoices. In Arizona, payment bonds are often a legal requirement for government-funded projects, and many private jobs now include them in contract terms as well.
Who Requires Contractor Bonds?
For federal construction jobs, the
Miller Act mandates performance and payment bonds on contracts over $150,000. Arizona has its own “Little Miller Acts” that apply to state and local government projects. Additionally, many large GCs require subcontractors to carry performance and payment bonds on high-dollar or high-risk private work. So whether you’re eyeing ADOT highway jobs or bidding a private development in Scottsdale, bonding might be part of the package.
How to Get Bonded for a Construction Project
Getting bonded is like applying for a line of credit. The surety evaluates your business based on:
- Financial statements & working capital
- Project history & track record
- Credit score (personal & business)
- Experience with similar jobs
- Current project load (WIP report)
JP Insurance Group helps you prep everything needed—financials, resumes, references—to present a complete bonding application. If you’re just starting out, we can help you build capacity with smaller bonds and grow from there.
Bond Premiums – What It Costs
Bond premiums vary based on your credit, financial strength, and the size of the contract. Most
performance and payment bonds cost between
0.5% to 3% of the total contract amount.
For example:
- A $100,000 job might have a $1,000 premium (1%)
- Larger jobs may qualify for tiered rates or volume discounts
Most contractors build this cost into their bid price, so the project owner essentially covers the expense.
Maintaining & Growing Bonding Capacity
Want to grow your ability to bid bigger jobs? Keep your books up to date, finish jobs cleanly, and avoid overextending. Bonding companies value reliability just as much as revenue. JP Insurance can advise on financial best practices, how to structure your business to improve capacity, and when to ask for increases to your bonding limits.
Frequently Asked Questions – Bid, Performance & Payment Bonds
What’s the difference between bid, performance & payment bonds?
- A bid bond guarantees that a contractor will honor their bid and provide a performance bond if awarded the job.
- A performance bond ensures the contractor will complete the project as agreed.
- A payment bond protects subcontractors and suppliers by guaranteeing they’ll be paid.
Are these bonds required for all construction projects?
Not always. They are typically mandatory for public works projects in Arizona and federally (per the Miller Act), and often required on large private jobs. Some general contractors also require their subcontractors to carry them.
How much do these bonds cost?
Bond premiums typically range from 0.5% to 3% of the total contract value, depending on the contractor’s financials, experience, and project scope. We help contractors shop for the most competitive rate.
What’s needed to qualify for a performance or payment bond?
You’ll usually need to provide business financials, credit history, project experience, and possibly personal guarantees. Think of it like applying for a line of credit—the surety wants to know you can handle the job.
Can I get bonded if I’m a new or small contractor?
Yes, but your bonding capacity may start small. We work with contractors who are just entering public work or growing into larger projects, and we can often place bonds with supportive sureties that help build history over time.
How quickly can I get a bid bond issued?
With a bond line already in place, bid bonds can often be issued same-day. If you’re just starting the process, we’ll help get your paperwork in order so you can move quickly on future opportunities.
Work Bigger, Bid Smarter
Ready to go after public contracts or level up to larger commercial work? Don’t let bonding requirements hold you back. JP Insurance Group has the expertise to help you qualify for bid, performance, and payment bonds—and the relationships with sureties to make it happen quickly.
Contact us to get started with your bond application or request a quote for your next project.