If you run a construction company in North Texas, sooner or later a general contractor or a city purchasing office is going to ask you for a bond. For a lot of owner-operators and small crews, that request stops the job cold. What kind of bond? How much does it cost? Who issues it, and how fast can you get one? This guide breaks down the two bonds that matter most on construction work in Texas — performance bonds and payment bonds — and how a local independent agent gets you approved without the runaround.
Performance and payment bonds, in plain English
A
performance bond guarantees that you will finish the job according to the contract. If you walk off the project or fail to deliver, the surety company steps in to make sure the work gets completed — and then comes after you to recover what it spent.
A payment bond guarantees that you will pay your subcontractors, laborers, and material suppliers. It protects everyone downstream of you so that a project owner does not end up facing liens from unpaid vendors on a job they already paid for.
These are both contract surety bonds. They are different from the license and permit bonds many Texas businesses carry, and they work very differently from insurance. If that distinction is fuzzy, our breakdown of a
surety bond versus insurance for Texas business owners clears it up in a couple of minutes.
The Texas “Little Miller Act”: bonds on public projects
Here is the piece most contractors miss. When you bid on a public works project in Texas — a school, a municipal building, a road, a water line — bonding is not optional. It is written into state law under Texas Government Code Chapter 2253, often called the “Little Miller Act.”
Two thresholds drive the requirement on state and local public works contracts:
- A
payment bond is required on public works contracts that exceed
$25,000.
- A performance bond is required on public works contracts that exceed
$100,000.
On federal construction projects, the parallel rule is the federal Miller Act, which generally requires performance and payment bonds on contracts above $150,000. Either way, if you cannot produce the bond, you cannot legally hold the contract — so the ability to get bonded quickly is often what decides whether you can even bid.
The contract surety trio: bid, performance, and payment
On a competitively bid public job, you will usually run into all three contract bonds in sequence:
- Bid bond — submitted with your proposal. It guarantees that if you win, you will actually sign the contract and furnish the required performance and payment bonds. If you back out, the owner can collect the difference between your bid and the next lowest bidder.
- Performance bond — issued once you are awarded the job. It guarantees completion at the contract price.
- Payment bond — issued alongside the performance bond. It guarantees your subs and suppliers get paid.
Bid bonds are typically issued at no charge because they are a gateway to the paid performance and payment bonds. A surety that gives you a bid bond has essentially pre-approved you for the final bonds — which is exactly why getting your bonding relationship set up early matters.
When do private (non-public) jobs need bonds?
Bonding is not just a government thing. On larger private commercial projects, the general contractor or developer will often require performance and payment bonds from their subcontractors to protect the lender and the owner. Private owners can set their own thresholds, so a $60,000 tenant build-out might require full bonding even though no public-project law applies. If a GC hands you a subcontract with a bonding requirement, that is a contract term you have to meet, not a suggestion.
How much do performance and payment bonds cost?
Contract bond premiums are quoted as a percentage of the contract amount. For financially strong contractors, rates commonly land in the
1% to 3% range — so a $200,000 job might cost roughly $2,000 to $6,000 to bond. Contractors with thinner credit or a shorter track record pay toward the higher end, and brand-new companies may start in a program built for smaller contracts.
The premium is not a fee you lose — it is the price of the surety extending its credit on your behalf. Several factors move your rate, and there are concrete steps to bring it down. We walk through them in our guide to how much a surety bond costs in Texas and how to lower your premium.
What sureties look at — and how to get approved faster
Contract surety underwriting is essentially a credit decision. The surety is betting you can finish the job, so it looks at the “three C’s”: character, capacity, and capital. To move quickly, have these ready before you need a bond:
- Business and personal financial statements — a current balance sheet and income statement, plus personal financials for the owners.
- Work-in-progress (WIP) schedule — your open jobs, contract values, costs to date, and estimated costs to complete.
- Bank line of credit — evidence you have working capital to float payroll and materials.
- References — from your bank, your CPA, and past project owners or GCs.
- A clean personal credit profile — the owner’s credit still carries real weight, especially for smaller contractors.
For smaller bonds (often under $500,000), many sureties use a streamlined “fast-track” program that relies mostly on a credit check and a short application, so approval can happen in a day or two. Larger bonds require the fuller financial package above.
Common mistakes that slow contractors down
The contractors who struggle to get bonded usually trip over the same things: waiting until a bid is due to start the process, keeping messy or out-of-date financials, mixing personal and business finances, or having no CPA-prepared statements when a surety asks for them. The fix is simple — build the bonding relationship before you chase the big job, and keep your books tight. If you want the ground-level basics first, start with
surety bonds in Texas: what they are and who needs one.
Get bonded with a local Texas agent
At TAP Insurance Agency, we work with contractors across DFW, Wise County, and all of Texas to line up bid, performance, and payment bonds through carriers that actually want to write construction risk. Whether you are chasing your first public bid or scaling your surety capacity to take on bigger contracts, we help you package your file so it gets approved — fast.
Ready to get bonded, or just want to know how much surety credit you qualify for? Call or text us at
(800) 666-2254, or visit
tapinsuretx.com for a free quote. We will help you get the bond in hand so you can win the work.
