Question 1

What are the three types of contract surety bonds?

Accepted Answer

The three types of contract surety bonds are bid bonds, performance bonds, and payment bonds. Bid bonds guarantee a contractor will enter into the contract at the bid price if selected. Performance bonds guarantee project completion per contract terms. Payment bonds guarantee payment to subcontractors and suppliers. Texas public projects over $25,000 require performance and payment bonds under Texas Government Code §2253.021.

Question 2

When is a performance bond required in Texas?

Accepted Answer

Texas Government Code §2253.021 requires performance and payment bonds on all public construction contracts over $25,000. Federal contracts over $150,000 require both bonds under the Miller Act (40 U.S.C. §3131). Most Texas municipalities also require performance bonds on public works regardless of amount.

Question 3

How much do Texas contract bonds cost?

Accepted Answer

Bid bonds are typically issued at no charge for contractors with established surety relationships. Performance and payment bonds cost 0.5%–3% of the contract amount. A $500,000 project bond costs roughly $5,000–$7,500 depending on contractor financials and credit. Quantum Surety offers same-day issuance for qualified contractors.

Question 4

What is the difference between a bid bond and a performance bond?

Accepted Answer

A bid bond is submitted with the bid — it guarantees the contractor will accept the contract at the bid price if selected. A performance bond is issued after contract award and guarantees project completion per contract terms. Texas public projects require both. Bid bonds cover the bidding phase; performance and payment bonds cover execution.