How much do performance and payment bonds cost?

Performance and payment bonds typically cost 0.75%–3% of the contract amount as a first-term premium, and the rate slides down as the contract gets larger and your credit and financials get stronger. On a $1,000,000 contract, that works out to roughly $10,000–$25,000, with well-qualified contractors landing near the low end. Premium is charged on the full contract (bond) amount, not on your profit, and the performance and payment bonds are usually priced together as one premium.

Typical bond rates by contract size and credit

The table below shows typical effective first-term rates as a percentage of the contract amount. These are estimates to plan against — your exact rate is set at underwriting once the surety sees the job, your financials, and your credit.

What that looks like in dollars

Applying those rates to common contract sizes gives the premiums below. They are shown as a single flat rate for simplicity. Many sureties actually price on a tiered schedule — a higher rate on the first band of contract value and lower rates on the amounts above it — so the blended premium on a large contract usually comes in a little under these figures.

Do you pay separately for the performance bond and the payment bond?

Usually not. On most public and private jobs the performance bond and the payment bond are issued together for the same contract amount, and the surety quotes one premium that covers both. When you see a "performance bond rate" or a "P&P rate," it normally means that combined figure. If an owner asks for only one of the two, confirm the price with your agent rather than assuming it is half.

What drives your rate

• Contract size — larger contracts carry a lower percentage rate.
• Financial strength — working capital and net worth relative to the job.
• Financial statement quality — CPA-reviewed or audited statements earn better rates than internal ones.
• Personal credit of the owners — especially on smaller and credit-based programs.
• Track record — a clean history of completed, profitable work of comparable size.
• Type of work and contract terms — long durations, large warranty periods, and unusual liquidated damages clauses can all push a rate up.

What changes the premium after the bond is issued

The first-term premium is based on the contract amount at award. If change orders increase the contract, the surety typically charges additional premium on the increase, at the same rate. Deductive change orders can reduce the final premium on some programs. If the job runs past the initial term, a renewal premium may apply for the extra time, and a maintenance or warranty bond that extends beyond completion is quoted separately.

Who pays for the bond

The contractor buys the bond, but the cost is normally built into the bid. On public work, bond premium is commonly carried as a general-conditions line item so it is recovered through the contract price. That is one reason to get a realistic premium figure before bid day rather than after award.

Bid bonds are usually free

A bid bond is almost always issued at no premium — the surety earns its premium on the performance and payment bonds if you win the job. So the cost figures above apply to the final performance and payment bonds, not the bid bond.

How to get a better rate

• Move from internally prepared statements to a CPA review or audit.
• Build working capital — retained earnings count more than equipment.
• Keep your WIP schedule clean and current, with no profit fade across jobs.
• Bond a steady volume with one surety so it prices you as an established account.

Want your exact number? Send us the contract amount and your latest financials and we'll quote the real rate — often the same day. If your job is within our Express limits (up to $3,000,000 for contractors), we can frequently qualify you on credit alone.