How to Get a Performance Bond in Texas: First-Bond Checklist

To get your first performance bond in Texas, apply through a surety agent when you decide to bid, not after you win. For a single job of up to about $1 million, our credit-based program needs the owner’s credit, a short application and the bid documents. Larger jobs go to full underwriting with CPA-prepared financial statements and a work-in-progress schedule.

This guide is for small trade and specialty contractors bidding a first bonded public job: a school security vestibule, a rooftop HVAC replacement, a county re-roof, a parking lot.

Three terms first. The principal is you, the contractor. The obligee is the owner who requires the bond, such as a school district, city, county or TxDOT. The surety is the insurance company that guarantees your performance to the owner.

What does a surety look at before it writes a performance bond?

A performance bond is the surety’s promise to the owner that the job gets finished, and if the surety pays a claim, it expects you to repay it. So underwriting asks one question: will this contractor finish this job?

Underwriters often sum up the answer as the “three Cs”:

• Character. Do you pay your bills and keep your commitments? On a small program, your personal credit history carries a lot of this answer.
• Capacity. Can you actually build this job? That means your experience with this kind of work, your crew and your supervision, and how much other work you already have.
• Capital. Is there enough money behind the company to carry payroll and materials until the owner pays? Retainage and slow public pay cycles make this matter.

The National Association of Surety Bond Producers notes the three Cs are shorthand for a deeper review, but they are a good map for your file.

Track 1: how to get a performance bond on jobs up to about $1 million

Most small Texas public jobs are well under $1 million. For a single job up to about that size, we use a credit-based contract bond program. It is underwritten, so there is no guarantee of approval. But it does not require audited financial statements, a bank line or a WIP schedule to get started.

What the underwriter needs:

1. The owner’s credit. You authorize a credit review on the owner or owners of the company. This stands in for much of what a financial statement would show.
2. A short application. Company name and legal structure, years in business, owners, the type of work you do, and the jobs you have completed.
3. The job documents. The solicitation or invitation to bid, the bid form with your price, the owner’s bond requirements, and the bond forms the owner wants used. After award, the contract itself.
4. Basic business information. Your trade licenses where the work requires them (TDLR for HVAC and electrical, for example), your address, and who will run the job.

Send the full bid package, not a summary. Scope, schedule, liquidated damages and the bond forms all shape the risk.

If you have read that prequalification takes reviewed or audited financial statements, that describes Track 2 below. For a first job inside the credit-based program, the short application is the starting point.

Track 2: full underwriting for larger jobs or a growing program

When a single job is larger than the credit-based program writes, or when you are carrying enough work at once that the surety needs to see the whole company, you move to full underwriting. Expect to assemble these items.

CPA-prepared financial statements

A CPA can prepare your year-end statements at three levels, and the AICPA describes them this way:

• Compiled. The CPA puts your numbers into proper financial-statement form but gives no assurance that they are right.
• Reviewed. The CPA asks questions and runs analytical tests and gives limited assurance that nothing material needs to change.
• Audited. The CPA tests and verifies the numbers and gives an opinion. This offers the most assurance and costs the most.

Which level you need depends on the surety and the size of your program, so ask before your CPA starts year-end work. A CPA who works with contractors, using percentage-of-completion accounting, produces statements underwriters read easily.

Work-in-progress (WIP) schedule

The WIP schedule lists every open job and shows whether your jobs are making the money you bid. A fictional glazing contractor:

Job	Contract	Est. total cost	Cost to date	% complete	Billed to date	Over / (under) billed	Cost to complete
ISD security vestibule	$240,000	$204,000	$153,000	75%	$192,000	$12,000	$51,000
County building re-glaze	$150,000	$126,000	$31,500	25%	$30,000	($7,500)	$94,500
Private storefront	$90,000	$72,000	$63,000	87.5%	$81,000	$2,250	$9,000
Total	$480,000	$402,000	$247,500		$303,000	$6,750	$154,500

What each column means:

• Contract: current price, including approved change orders.
• Est. total cost: what you now expect the whole job to cost. The gap to the contract is your expected gross profit.
• Cost to date: what you have spent so far.
• % complete: cost to date ÷ estimated total cost. Vestibule: $153,000 ÷ $204,000 = 75%.
• Billed to date: what you have invoiced.
• Over / (under) billed: billings minus earned revenue (contract × % complete). Vestibule: 75% of $240,000 = $180,000 earned against $192,000 billed, so $12,000 overbilled. The county job is underbilled: work done but not yet invoiced.
• Cost to complete: estimated total cost minus cost to date.

Underwriters compare WIP schedules over time. A job whose estimated cost keeps climbing is losing profit (“fade”), and that is the trend they watch for.

The rest of the file

• Completed-projects list and references. Your largest recent jobs, bonded or not, with owner, amount, completion date and a contact.
• Bank reference or line of credit. Your banker, and the size and balance of any working-capital line.
• Resumes of key people. Owner, estimator and field supervisor. On a first bond these carry much of the capacity question.
• General indemnity agreement (GIA). See below.

What is the general indemnity agreement, and why do I sign it personally?

Every bonded contractor signs a GIA: a written promise to repay the surety for losses and expenses it pays on your bonds. The company signs, and on a small or young company the owners usually sign personally too. That is personal indemnity: if the company cannot repay the surety, the owners can be asked to.

Sureties commonly ask the owners’ spouses to sign as well. As one broker’s explanation puts it, a spouse’s signature closes the gap if assets are held in a spouse’s name. A GIA usually covers every bond the surety writes for you, not just this one. Read it before you sign, and have your attorney review it if you like.

What is the difference between single-job and aggregate bonding capacity?

Once the surety approves you, it sets two limits:

• Single-job limit: the largest one contract it will bond.
• Aggregate limit: the most bonded work it will let you carry at one time.

A fictional example: the surety sets a $500,000 single-job limit and a $1,200,000 aggregate limit. Your WIP above has $480,000 of contracts with $296,250 earned, which leaves $183,750 of work still to perform. (Sureties measure work on hand in different ways. Ask yours how it counts.)

• A $350,000 school HVAC job fits. It is under the single-job limit, and it brings your work on hand to $533,750, under the aggregate.
• A $650,000 job does not fit, even though the aggregate has room, because it exceeds the single-job limit.

That is why change orders matter. A $40,000 change order raises the bonded amount and uses up aggregate room.

When should I start? Before you bid, after award, before delivery

The bid bond is due with your bid. The performance and payment bonds come due shortly after award. On TxDOT work, the contractor must furnish the executed contract and bonds within 15 days after written notice of award (2024 Standard Specifications, Item 3, Article 3.4). Other owners set their own windows in the bid documents. If you are not already approved, a short window is the wrong time to begin underwriting.

Stage	What to do
Before you bid	Send the solicitation, your price and the owner’s bond requirements. Complete the application so underwriting happens now. Get the bid bond on the owner’s form.
After award	Send the notice of award and contract. Confirm the price, including accepted alternates, the bond forms and the deadline.
Before delivery	Check names, contract number, amounts, signatures and the surety’s power of attorney (proof of who may sign for the surety). Deliver by the deadline.
During the job	Send executed change orders to your agent. Keep your WIP current.
At closeout	Send proof of final acceptance. Warranty bond required? See maintenance bonds.

The bid stage is covered in detail in our guide to getting a Texas bid bond. For how the two bonds differ, see bid bond vs. performance bond. On bid bonds in our program, there is no separate premium or only a small flat fee. The premium is earned on the performance and payment bonds after award.

Which bond forms does a Texas public owner require?

The owner’s form controls. Under Texas Government Code §2253.021(e), a state agency’s bond must be payable to the state and approved as to form by the attorney general; any other public owner’s bond must be payable to and approved by that owner. The solicitation usually includes the form, and the surety issues on it rather than its own.

Does a payment bond come with the performance bond?

On Texas public work, almost always. Section 2253.021(a) requires a performance bond when a contract is in excess of $100,000. A payment bond is required in excess of $25,000, or in excess of $50,000 when the owner is a city. Both bonds are in the full contract amount. So any contract that triggers a performance bond also triggers a payment bond, which protects your subcontractors and suppliers. Both are underwritten on one application; see our payment bond page.

First performance bond checklist

Item	Track 1: credit-based (single job up to ~$1M)	Track 2: full underwriting
Short contractor application	Yes	Yes (longer questionnaire)
Owner credit authorization	Yes	Yes
Solicitation, bid form and owner bond requirements	Yes	Yes
Owner’s bond forms	Yes	Yes
Contract and notice of award (after award)	Yes	Yes
Trade licenses, if the work requires them	Yes	Yes
Completed-projects list	Helpful	Yes, with references
CPA-prepared year-end financial statements	No	Yes (compiled, reviewed or audited, as the surety requires)
WIP schedule	No	Yes
Bank reference or line of credit	No	Yes
Key people resumes	Helpful	Yes
General indemnity agreement	Yes	Yes
Executed change orders during the job	Yes	Yes

Getting a quote

Send us the bid package: solicitation, bid date, estimated price and the owner’s bond forms, plus the owner’s name for the credit-based application. If the job is larger than the program writes, we will tell you what the full file needs. Start before bid day.

Call us at (281) 484-8320, or start an application from our Texas performance bond page. For every other bond a Texas contractor uses, see contractor bonds.