Bonding Capacity Letter: What Texas Bid Packets Ask For

A bonding capacity letter is a surety’s written statement that it would consider bonding you, usually with a limit for one job and a limit for all your work. It isn’t a bond, and it isn’t a promise of one. What it must say depends on your packet, because Texas owners ask for different things under different names.

You may see it called a bondability letter, a letter of bondability or a surety letter. This post covers what Texas packets actually ask for, what the letter does and doesn’t do, and a sample.

Three terms first. The principal is you, the contractor. The obligee is the owner the bond protects. The surety is the insurance company that backs the bond.

What do Texas bid packets actually ask for?

These are real packets we read. No two ask for the same thing.

Owner	What it calls the letter	What it wants
Spring ISD, 2025 sealed proposal	”letter of statement from a bonding company”	That you are “eligible to obtain both payment and performance bonds.” No amount or date stated for the letter; a questionnaire asks total and available capacity
Lone Star College, 2026 roof packet	”Surety Letter”	Attached to the response. The form also asks bonding capacity per project and aggregate. A bid bond is separately required
Lamar State College Orange, 2025 façade packet	”letter of intent from surety company"	"ability to bond Respondent for the entire Project,” plus total and available capacity and backlog
TIPS, a Texas purchasing cooperative	”Bonding Capacity Letter”	Surety letterhead, “maximum bonding capacity,” a surety signature, and a Treasury-listed surety. Scored on aggregate capacity
City of Tyler, contractor qualification	City surety questionnaire, plus a separate surety letter	Whether the surety will “furnish the bonds as specified within contractors bonding limits”

The takeaway: use the packet’s word, and answer its checklist. A general letter that names no project may not meet “ability to bond Respondent for the entire Project.” A letter from the wrong party may not meet TIPS. The City of Tyler has said a surety letter must be prepared by a National Association of Surety Bond Producers member. Read the section before you ask for the letter.

What goes in the letter?

Most letters include:

• Who the surety is, and often that it is authorized in Texas.
• Who you are, in your full legal name, and the project if the packet wants it.
• The limits, when asked: a single-job figure and an aggregate figure.
• The condition: any bond depends on underwriting at the time.
• A signature from someone with authority, with contact details so the owner can verify it.

What the letter doesn’t guarantee

This is the part contractors and owners both misread. As one surety’s writer puts it, a letter of bondability “does NOT offer any kind of prequalification for a particular job.” Another agency says nearly all such letters carry a clause like: “Neither we nor the surety company assume any obligation to commit to writing a bond.”

So a letter does not get you out of underwriting after you win. A lot can change between proposal day and award: your work on hand, your finances, the final contract terms.

	Capacity letter	Bid bond	Performance and payment bonds
What it is	A statement of willingness to consider	A guarantee you’ll sign and post final bonds	The guarantee on the job itself
When it’s due	With your proposal, if asked	With your bid, if asked	After award, before work starts
Who can claim	Generally no one	The owner, if you walk away	The owner; subs and suppliers on the payment bond

Spring ISD’s 2025 packet shows the order clearly: the letter goes in with the proposal, and “Payment and performance bonds shall be provided after the proposal/contract award.”

Sample bonding capacity letter

This is our own illustration. It is not a real letter, not a bond, and not a form any owner has approved. If your packet supplies a form or lists required wording, that controls, and your surety’s wording will differ.

[Surety company letterhead]

[Date. Check the packet’s date window.]

To: [Owner name and department, or “To whom it may concern” if the packet allows it]

Re: [Contractor’s full legal name]; [solicitation number and project name]

[Surety’s legal name] provides surety credit to [Contractor]. As of the date of this letter, we would consider bonds for [Contractor] on a single contract of up to $[amount], with total bonded work on hand of up to $[amount].

[Surety’s legal name] is authorized to do business in the State of Texas and is listed on U.S. Treasury Department Circular 570. [A.M. Best rating, if the packet asks for it.]

If [Contractor] is awarded this contract and asks us for the performance and payment bonds it describes, we will review that request when it is made. Any bond depends on our underwriting at that time, including the contract terms, the bond forms, project funding, and [Contractor]‘s current finances and work on hand.

This letter is not a bond or a bid guarantee, and it does not commit us to issue any bond. It creates no obligation to the owner or any other party.

[Signature]

[Name, title, authorized representative or attorney-in-fact]

[Phone and email for verification]

[Power of attorney attached, if required]

A letter should only state what is true for that surety. Leave out any sentence that doesn’t apply.

Date rules can disqualify an old letter

Don’t reuse a letter without checking. TIPS, a Texas purchasing cooperative run by Region 8 Education Service Center, has asked for “a current letter (issued on or after the first day of the month preceding the date on which the solicitation was posted).” So if a solicitation posted on March 12, a letter dated February 1 or later passes. A letter from January does not.

That wording comes from TIPS proposals for cooperative vendor contracts, including one job order lighting contract. It is not a Texas law or a general rule, and the job packets in the table above set no date window. It is why you check every time.

Single vs. aggregate: which number does the packet use?

Your single-job limit is the largest one contract a surety will bond. Your aggregate limit is the most bonded work you can carry at once. Our performance bond guide walks through a worked example.

What matters here is that packets use these differently. TIPS scores aggregate capacity. Lone Star College’s form asks for both. Lamar State College Orange asks for total capacity, available capacity and current backlog. Spring ISD’s letter clause states no amount, but its questionnaire asks for total and available capacity. Don’t send a bigger number than your surety has set, and don’t confuse total with available.

How sureties set the numbers

No single formula exists, and the surety sets your limit. A common rule of thumb ties it to working capital (current assets minus current liabilities):

• A CPA firm, James Moore & Co., says sureties “typically apply a multiplier of around 10 times net working capital.”
• Another, UHY, describes “the lesser of 10-20 times working capital” or the same multiple of net worth.
• A surety’s writer turns it around: working capital of roughly 10% of backlog.

As plain arithmetic, $250,000 of working capital at 10 times is about $2.5 million. That is an illustration, not a quote. Sureties adjust the inputs. For one, they generally disallow receivables three months or older, with the possible exception of retainage. On smaller single jobs, a credit-based program may underwrite differently, as the performance bond guide explains.

To grow capacity over time: collect old receivables, get CPA-reviewed statements, and build a record of finished jobs.

TxDOT’s capacity is a different thing

TxDOT has a similar-sounding idea, but it isn’t your bonding capacity. It sets its own bidding capacity: on audited statements, “multiplying the net working capital by a factor determined by the department” (43 TAC §9.12). On waived projects, you’re limited to $1 million unless you file a compiled or reviewed statement. TxDOT also subtracts your uncompleted TxDOT work. A surety’s letter doesn’t change that number. See TxDOT bid bonds.

What to send us

• The solicitation number, and the section that asks for the letter
• The due date, and who the letter should be addressed to
• Your estimated bid or the job size
• Your full legal company name

Starting from nothing? The first-bond checklist covers the application, and how to get a bid bond covers bid day.

Frequently asked questions

Is a bonding capacity letter the same as a bid bond? No. A bid bond is a guarantee tied to your bid. A capacity letter states that a surety would consider bonding you, and it generally creates no obligation to the owner. Some packets want both: a 2026 Lone Star College roof packet asked for a surety letter and a bid bond.

Does a bondability letter guarantee I’ll get the bond? No. Surety letters typically make any bond subject to underwriting when you ask for it, including the contract terms, the bond forms, project funding, and your finances at that time.

How recent does the letter need to be? The packet decides. TIPS, a Texas purchasing cooperative, has required a letter issued on or after the first day of the month before the solicitation was posted. Other packets we read set no date. Don’t assume an old letter passes.

Who has to sign the letter? It depends on the packet. TIPS has required surety letterhead and an authorized surety representative’s signature. The City of Tyler has said the letter must be prepared by a National Association of Surety Bond Producers member. Others say only “bonding company.” Read that requirement before you request the letter.

How much bonding capacity do I need for a bid? Enough for this job at your single-job limit, and enough that your total work on hand stays under your aggregate limit. Some packets ask for those numbers, and some letter clauses ask only for a statement that you are eligible. Where Texas law requires them, performance and payment bonds are each in the full contract amount.

Getting a letter

We can provide bonding capacity letters for Texas bids. Call (281) 484-8320 with your packet, or start from our contractor bonds page.