Project-completion guarantee, 100% of contract — Gov Code Ch. 2253.
Required on every Texas public-works contract over $100,000. Guarantees the project will be completed per the contract or the surety pays. Premium typically 0.5%–3% of contract amount.
- Texas public-works compliant
- Pair with payment bond for Little Miller Act
- Harris County, TxDOT, statewide
The surety\'s guarantee that the job gets done.
A Texas performance bond is a three-party surety guarantee: the contractor (principal) promises to complete the project per the contract; the owner (obligee) is the beneficiary; and the surety company stands behind the contractor\'s promise financially.
If the contractor fails to perform — abandons the project, goes bankrupt, or fails to meet contract specifications — the surety investigates, then either finances the contractor\'s completion, hires a replacement contractor, or pays the owner up to the bond penalty. Afterward, the surety recovers its costs from the contractor under the general indemnity agreement every principal signs.
On Texas public-works projects over $100,000, performance bonds are mandatory and paired with payment bonds under the Texas Little Miller Act.
Premium scales with contractor credit and project risk.
Performance bonds are hand-priced after prequalification. Larger contractors with clean history pay at the low end; smaller or credit-challenged contractors pay more.
| Contractor tier | Premium rate | $1M contract cost |
|---|---|---|
| Established contractor 750+ credit, strong financials | 0.5–1.0% | $5,000–$10,000 |
| Standard contractor 680–749, solid WIP | 1.0–1.5% | $10,000–$15,000 |
| Developing contractor 620–679, limited history | 1.5–2.5% | $15,000–$25,000 |
| Credit-challenged Sub-620 or prior loss | 2.5–3.0% | $25,000–$30,000 |
Premium covers the project period. Warranty/maintenance work is typically a separate bond.
Four steps, driven by prequalification.
- 01
Prequalification
Financial statement (reviewed or audited), work-in-progress schedule, business history, bank line, and signed general indemnity agreement. Surety establishes single-job and aggregate capacity.
- 02
Project review
Submit contract, scope, schedule, and owner details. Surety reviews project size against your single-job limit and assesses risk.
- 03
Bond issued
Performance bond executed on AIA A312 or the obligee\'s required form. Delivered at contract signing with paired payment bond.
- 04
Completion & release
Bond remains in force through substantial completion. Final release at acceptance.
Statute, penalty, and what triggers a claim.
Texas Government Code Chapter 2253 — the Little Miller Act. §2253.021 requires performance and payment bonds on every public-works contract over $100,000.
100% of the contract amount. Increased by contract change orders.
AIA A312 (private commercial), SF-25 (federal), Texas Building and Procurement Commission forms (state), and custom forms for Houston, Harris County, TxDOT, and school districts.
From contract signing through substantial completion and final acceptance. Warranty typically handled by a separate maintenance bond.
Declared contractor default — failure to perform, abandonment, bankruptcy, or material breach. Obligee provides notice; surety investigates and elects its completion option.
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Once your program is set, P&P bonds issue the day your contract is signed.
The bonds that travel with a performance bond.
Performance bond questions from Texas contractors.
What is a Texas performance bond?
A performance bond is a surety guarantee that a contractor will complete a construction project per the contract terms. If the contractor defaults, the surety either finances completion, hires a replacement contractor, or pays the obligee up to the bond penalty.
When is a performance bond required in Texas?
Texas Government Code Chapter 2253 requires performance bonds on all state and local public-works contracts over $100,000. Private owners may require them at any threshold. Federal construction over $150,000 requires them under the Miller Act (40 USC §3131).
How much does a performance bond cost?
Performance bond premiums run 0.5%–3% of the contract amount, depending on contractor credit, financial capacity, and project risk. A $1M contract typically costs $5,000–$30,000. Strong contractors with established bonding programs pay at the low end; newer or credit-challenged contractors pay more.
What is the bond penalty amount?
Texas Government Code §2253.021 requires a performance bond in the full contract amount — 100% of the contract price. Most private contracts follow the same 100% standard. The penalty caps what the surety will pay on a valid claim.
What happens if the contractor defaults?
The obligee declares default and calls on the surety. The surety investigates, then elects: (1) finance the defaulting contractor to completion, (2) hire a replacement contractor to complete, or (3) pay the obligee up to the bond penalty. The surety then recovers from the principal under the general indemnity agreement.
How long is the bond in force?
Through substantial completion plus any warranty period in the contract. Most performance bonds do not cover warranty work separately — that's handled by a maintenance bond. Read the bond form carefully for stated expiration.
How fast can a performance bond be issued?
Same-day for existing surety clients with capacity. New contractors typically need 3–7 days to complete prequalification (financials, WIP, references, GIA signing) before bonds can issue on demand.
Get your Texas performance bond today.
Same-day issuance for prequalified contractors. Harris County and statewide.