Required on every Texas public-works contract over $25,000 under Gov Code §2253.021. Protects first- and second-tier subs, suppliers, and laborers. Bundled with the performance bond at 0.5%–3% of contract.
A Texas payment bond is a three-party surety guarantee focused downstream: the general contractor (principal) promises to pay every subcontractor, supplier, and laborer on the project; those parties are the beneficiaries; and the surety company backs the promise financially.
If the GC fails to pay a sub — because of dispute, cash-flow collapse, bankruptcy, or disappearance — that sub can file a direct claim against the payment bond. The surety investigates, validates the unpaid work or materials, and pays the claim up to the bond penalty. Afterward, the surety recovers from the GC under the general indemnity agreement.
On public works, the payment bond matters even more than on private jobs: subs cannot file a mechanic's lien against a city, county, state, or federal building. The public property is off-limits. The payment bond is the only legal recourse left — which is exactly why Texas and federal law require it.
Payment bonds are not priced separately — they travel with the performance bond on the same underwriting, same GIA, one combined premium.
| Contractor tier | Combined P&P rate | $500K contract cost |
|---|---|---|
| Established contractor 750+ credit, strong financials | 0.5–1.0% | $2,500–$5,000 |
| Standard contractor 680–749, solid WIP | 1.0–1.5% | $5,000–$7,500 |
| Developing contractor 620–679, limited history | 1.5–2.5% | $7,500–$12,500 |
| Credit-challenged Sub-620 or prior loss | 2.5–3.0% | $12,500–$15,000 |
Rates cover combined performance + payment. Pricing the payment bond standalone is unusual.
Financial statement (reviewed or audited for larger contracts), work-in-progress schedule, bank reference, resume of key personnel, signed general indemnity agreement. Surety sets single-job and aggregate capacity.
Submit contract, scope, schedule, and owner details. Payment bond is quoted alongside the performance bond as a single package.
Performance and payment bonds executed on the obligee's required form — AIA A312, SF-25, Texas BPC, Harris County, or TxDOT. Delivered at contract signing.
Payment bond stays in force until subs and suppliers are paid and the statutory claim window closes. Release typically follows final project payment and lien-release acknowledgments.
Texas Government Code Chapter 2253 — the Little Miller Act. §2253.021(a)(2) requires a payment bond on every public-works contract over $25,000.
100% of the contract amount. Increased with change orders.
First-tier subs and suppliers who contracted directly with the GC. Second-tier subs and suppliers who contracted with first-tier subs. Laborers. Equipment renters. Third-tier and more remote claimants are generally excluded under Texas law.
Under §2253.041, notice of claim must be sent to the GC and surety by the 15th day of the third month after the month in which labor or materials were furnished. Certified mail. Strict compliance.
Claimants must file suit within one year after giving the §2253.041 notice. Texas courts enforce the deadline strictly.
AIA A312 (private), SF-25A (federal), Texas BPC forms (state), and custom forms for Harris County, Houston, TxDOT, and school districts.
We keep the current approved forms for every major Texas public obligee — no form-rejection surprises on closing day.
We build bonding programs that scale with revenue and WIP, not transactional one-off quotes.
Once your program is set, P&P bonds issue the day your contract is signed.
A payment bond is a surety guarantee that the general contractor will pay every subcontractor, second-tier sub, material supplier, and laborer who works on the project. If the GC fails to pay, those parties can file a direct claim against the bond and recover from the surety, which then recovers from the contractor under the general indemnity agreement.
Texas Government Code §2253.021 requires a payment bond on every state or local public-works contract over $25,000 — a lower threshold than the $100,000 performance bond trigger. Federal construction over $150,000 requires a payment bond under the Miller Act (40 USC §3131). Private owners may also require them.
Payment bonds are almost always bundled with the performance bond at a single combined rate — typically 0.5%–3% of the contract amount based on contractor credit, financial capacity, and project risk. There is usually no separate charge for the payment bond when issued alongside a performance bond on the same contract.
First-tier subcontractors and suppliers who contracted directly with the GC, and second-tier subs and suppliers who contracted with first-tier subs. Laborers who performed work. Equipment rental companies. Remote-tier claimants (third-tier and beyond) generally cannot claim under the Texas Little Miller Act.
Texas Gov Code §2253.041 requires claimants to send written notice of the claim to the GC and surety by the 15th day of the third month after the month in which the labor or material was furnished. Suit must be filed within one year after the claim notice. Strict compliance is required — late notice is the most common reason claims fail.
Because mechanic's liens do not attach to government property — the state, county, or city cannot have its public buildings liened. The payment bond is the only legal recourse subs and suppliers have if the GC fails to pay them on a public project. On private jobs, a lien is usually the fallback; on public jobs, the bond is the fallback.
Legally yes — they are two distinct bonds protecting two different parties. Practically, sureties issue them together on the same underwriting, the same GIA, and typically one combined premium. You cannot get one without the other on a Texas Little Miller Act project.
Bundled with performance on every public-works project. Harris County and statewide.
