Requires contractor to post performance and payment bonds guaranteeing contract completion and subcontractor/supplier payment.
Applicability: Required for construction and large services contracts (typically >$150K).
Key Requirements
Obtain performance bond from surety guaranteeing contract completion
Obtain payment bond guaranteeing subcontractor/supplier payment
Bond amounts equal contract value (or specified percentage)
Maintain bond coverage throughout contract period
Common Issues & Pitfalls
Underestimating bond cost (can be 2-3% of contract value)
Losing bond coverage midway through contract (auto-default)
Not understanding surety can sue contractor for bond claims
Failing to notify surety of contract changes/delays
Contractor Guidance for Your Bid
Bonds are insurance the government forces you to buy. Get bonding capacity BEFORE bidding. Surety will require financial statements and references. Budget 2-3% of contract value. If you fail, surety pays government, then sues you for reimbursement + interest.