Why Subcontractor Bond Verification Matters on Public Jobs
A sub handed me a clean performance bond PDF on a $2.1M school job. The surety had cancelled it 40 days earlier for unpaid premium. I only caught it because I called the surety. Verify a bond is active with the issuing surety, not by trusting the PDF the sub prints for you.
That one phone call saved a public owner from a sub with no backing on a six-figure scope. Subcontractor bond verification matters more on public jobs than almost any other check you run, because the public owner's money, the statutory deadlines, and your own standing as the prime are all riding on a piece of paper that can go stale the moment a premium goes unpaid. I have seen this play out across thousands of bids. The bond looks fine. The coverage behind it is gone.
What is a performance bond versus a payment bond?
A performance bond guarantees the work gets finished. A payment bond guarantees the subs and suppliers below the bonded party get paid. They are two separate instruments, usually issued together, and they protect different people.
On a public job the chain runs like this. The owner requires the prime (you) to bond the whole contract. You, in turn, often require your larger subs to furnish their own performance and payment bonds for their scope. If a bonded sub walks off at 60% complete, the performance bond surety pays to complete that scope up to the penal sum, which is the bond's dollar limit. If that same sub stiffs its second-tier suppliers, the payment bond is what those suppliers claim against.
Here is the part people miss. On public property you cannot file a mechanics lien. Government land is not lienable. The payment bond is the only security a lower-tier supplier has. That is exactly why public bonding statutes exist, and why a missing or dead payment bond on a public job leaves a trail of unpaid suppliers who will come after you, the prime, for their money.
- Performance bond: covers completion of the work if the sub defaults. Typical penal sum is 100% of the subcontract value.
- Payment bond: covers labor and material claims from those below the bonded sub. Usually also 100% of the subcontract value.
- Bid bond: a smaller, separate instrument (often 5% to 10%) that guarantees the bidder will sign at the price quoted. Not the same as the two above.
What thresholds trigger bonding on public projects?
For federal construction contracts, the Miller Act sets the line at $150,000. Above that, the prime must furnish both a performance bond and a payment bond before work starts (40 U.S.C. 3131). Below it, the contracting officer still has to require alternative payment protection. You can read the statute and the surety mechanics in the SBA Surety Bond Guarantee program overview.
State and local public work runs on what the industry calls "Little Miller Acts." Every state has one, but the dollar trigger is not uniform. The numbers move, so confirm the current figure with the awarding agency before you assume a sub is exempt. As a rough map of how varied it gets:
| Jurisdiction | Public bonding trigger (approx.) |
|---|---|
| Federal (Miller Act) | $150,000 |
| California | $25,000 (payment bond required above this on public work) |
| Texas | $25,000 payment bond / $100,000 performance bond on state work |
| New York | Set per solicitation, commonly $100,000+ |
| Florida | $200,000 for state-level bonding under its Little Miller Act |
Treat those as starting points, not gospel. Thresholds get amended, and a city or school district can set its own floor below the state number. The pattern that holds everywhere: the bigger the public contract, the more certain bonding is mandatory, and the more it costs you if the bond turns out to be worthless.
How do you confirm a bond is actually current?
The PDF tells you a bond existed on the day it was printed. It tells you nothing about today. Premium nonpayment, surety insolvency, and plain forgery all leave the certificate looking identical to a live bond. Four checks separate a real bond from a decoration.
Is the surety authorized to write this bond?
For federal work, the surety has to appear on the Treasury's list of certified companies, published as Circular 570. Pull the Treasury list of certified surety companies and confirm the surety is on it, then check the underwriting limit. A surety with a $5M underwriting limit cannot solely back a $12M bond without reinsurance or co-sureties. On state work, confirm the surety holds a certificate of authority from that state's department of insurance.
Does the surety confirm the bond directly?
Call the surety's home office, not the agent who sold it, and read them the bond number. Ask three things: is this bond active, what is the current penal sum, and has any premium lapsed or claim been filed. A legitimate surety will confirm a real bond. A forged bond number returns nothing, and that is the answer you need before the slab goes in.
Does the power of attorney check out?
Every bond is signed by an attorney-in-fact on behalf of the surety, backed by a power of attorney document. Verify that the named individual actually holds current authority to bind that surety, and that the POA was not expired or revoked on the bond's effective date. Forged bonds frequently reuse a real POA past its date.
Do the penal sum and dates match the subcontract?
The bond amount should equal the subcontract value, including approved change orders. I have watched a sub's scope grow $400K through change orders while the original bond sat at the base number, leaving that added work effectively unbonded. When you issue a change order that moves the contract sum, get a bond rider that raises the penal sum to match. Otherwise your coverage quietly falls behind your exposure (see change orders).
What does a bad bond actually cost you?
Run the math on a sub defaulting at 50% on an $800,000 mechanical scope. With a live performance bond, the surety funds completion above what is left in the contract balance, and your schedule takes a hit measured in weeks. With a dead bond, you are self-funding a replacement sub at emergency-mobilization rates, often 20% to 40% over the original price, while the public owner assesses liquidated damages against you for every day past substantial completion. On public work those damages routinely run $500 to $5,000 a day.
The payment-bond side is just as sharp. Unpaid second-tier suppliers on a public job have a statutory claim, and with no valid payment bond and no lien rights against public land, they pursue the prime. You can end up paying twice for the same materials.
Frequently asked questions
Is a bond the same as insurance? No. Insurance protects the policyholder against its own losses. A bond is a three-party guarantee where the surety pays the project owner if the bonded contractor defaults, then pursues the contractor for repayment. A sub can carry full general liability and still be unbonded.
Can I rely on the bond certificate the sub gives me? Not on its own. The certificate proves a bond was issued on its print date. It does not prove the premium is paid, the surety is solvent, or the bond was never cancelled. Confirm status with the issuing surety directly.
What is the difference between the Miller Act and a Little Miller Act? The Miller Act governs federal construction contracts and requires bonding above $150,000. Little Miller Acts are the state-level equivalents that require bonding on state and local public work, each with its own dollar threshold.
This is operations guidance, not legal advice. Bonding statutes and thresholds vary by jurisdiction and change, so confirm specifics with the awarding agency and your own counsel. For more on vetting subs across license, insurance, and bonding before you award, start at SubSource.
On your next public bid, before you award any sub over the bonding threshold, write the surety's home-office phone number on the bid tab and make the verification call the same day you receive the bond. Read them the bond number, confirm it is active, and note the penal sum against the subcontract value including change orders. One call, two minutes, before the work starts.