Payment bond: who it protects, how to claim, what it costs
Enter the contract price: whether a payment bond is required on federal work and the premium for the bond pair appear at once.
Performance and payment bond premium
$11,000
estimated, standard scale, for a $750,000 contract
| Federal requirement | performance and payment bonds of 100 % each |
| Each bond, if required | $750,000 |
| Effective rate | 1.47 % |
| Payment bond | usually priced together with the performance bond |
Estimate from a published standard contract scale; sureties apply preferred or surcharged rates after reviewing your financial statements.
| Layer | $ per $1,000 | Premium |
|---|---|---|
| $0 to $100,000 | 25 | $2,500 |
| $100,000 to $500,000 | 15 | $6,000 |
| $500,000 to $750,000 | 10 | $2,500 |
Compiled by Radif Partners · Method and sources · rules read October 22, 2026
A payment bond guarantees that a contractor on a public project will pay its subcontractors, laborers and material suppliers. It exists because those parties cannot file a mechanic's lien on public property, so the bond takes the lien's place. On federal construction above $150,000, the Miller Act requires a payment bond for 100 percent of the contract price, alongside the performance bond; between $35,000 and $150,000, the contracting officer selects payment protections that may or may not be a bond. A first-tier subcontractor or supplier can claim directly. A second-tier one, with no contract with the prime contractor, must give written notice to the prime within 90 days of its last work or delivery. Any suit on the bond must be filed within one year of that last day. The premium is usually charged together with the performance bond, on the contract price: about $11,000 for a $750,000 contract on a published standard scale.
Why public work needs a payment bond
On a private job, an unpaid subcontractor or supplier can file a lien on the property and force payment from the sale of the building if needed. Public property cannot be liened. Without a bond, a subcontractor on a federal courthouse or a county school would have no security if the prime contractor failed. The Miller Act solved this in 1935 by requiring a payment bond on federal construction, and every state followed with its own Little Miller Act for state and local projects.
The payment bond names the government as obligee, but the protected parties are those who furnished labor and material. They claim directly against the surety, which pays valid claims up to the bond amount and then recovers from the contractor.
When it is required
Under FAR 28.102-1, any federal construction contract exceeding $150,000 needs a performance bond and a payment bond. The payment bond equals 100 percent of the original contract price unless the contracting officer finds that impractical. For contracts between $35,000 and $150,000, the officer selects two or more payment protections: a payment bond, an irrevocable letter of credit, a tripartite escrow or a certificate of deposit. State thresholds vary widely, and some states require payment bonds on much smaller jobs.
Is a payment bond required on your federal contract?
Performance and payment bond premium
$2,800
| Federal requirement | two payment protections, not necessarily bonds |
| Each bond, if required | n/a |
| Effective rate | 2.33 % |
| Payment bond | usually priced together with the performance bond |
Who can claim, and the deadlines
The Miller Act protects two tiers. A first-tier claimant, with a direct contract with the prime contractor, can sue on the bond after 90 days have passed since its last labor or delivery if still unpaid. A second-tier claimant, such as a supplier to a subcontractor, must first send written notice to the prime contractor within 90 days of its last labor or delivery, stating the amount claimed and the party it supplied. Below the second tier, nobody is protected: a supplier to a supplier has no claim.
Every suit must be filed in federal court within one year after the last labor was performed or material supplied. These deadlines are strict, and a claimant who misses them loses the bond claim even with an unpaid invoice. State payment bond laws set their own notice periods, often 60 to 120 days.
What it costs
Most sureties price the performance and payment bonds as a pair, at one premium on the contract price. On a published standard scale, a $750,000 contract costs about $11,000 for both bonds. When the payment bond is required alone, it is often priced at the same rate or slightly less. The performance bond page shows the scale layer by layer, and how financial statements and experience move a contractor above or below it.
For subcontractors: protect your claim
Ask the prime contractor or the contracting agency for a copy of the payment bond before starting work; on federal jobs, the agency must furnish a certified copy on request. Keep the dates of your last work or delivery, because every deadline counts from it. Send notices by a method that proves receipt. Small claims are usually paid once the surety sees a complete file; disputed ones may need a lawyer familiar with bond claims.
For prime contractors: keep claims away
A paid claim on a payment bond becomes a debt to the surety and a mark on the contractor's record, making the next bond harder to obtain. Paying subcontractors on time, collecting lien waivers with each payment, and resolving disputes early protects the bonding capacity that a contractor needs to bid the next public job.
The bond amount caps what all claimants together can recover. On a troubled project with many unpaid parties, claims can exceed the bond, and early, documented claims stand a better chance of full payment.
Prime contractors can also require payment bonds from their own subcontractors, which gives suppliers and laborers further down the chain a second, independent source of payment and protects the prime's own bond against claims it would otherwise have to absorb.