Knowledge Base

What is a payment bond?

A payment bond guarantees that subcontractors, laborers, and material suppliers on a project will be paid, even if the prime contractor defaults or goes under.

You can't place a mechanic's lien on public property. On federal jobs, the Miller Act uses a payment bond instead, as protection for anyone supplying labor and materials. The bond amount generally equals the full contract price and cannot be less than the performance bond. Unpaid subcontractors and suppliers can sue the surety directly. Most states follow the same model through “Little Miller Acts,” often with lower thresholds.

Deadlines are strict. Under the Miller Act, a claimant without a direct contract with the prime generally must give written notice within 90 days of last furnishing labor or materials. Any suit must be filed within one year. Miss those windows and the claim can be forfeited. Payment and performance bonds usually appear together in the bid requirements. Nonlinear extracts both during Spec Takeoff so estimators can see the surety obligations attached to an opportunity.

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