Bid Bond vs. Performance Bond: What Changes When You Win in Texas
A bid bond backs your promise to sign; a performance bond backs the finished job. Amounts, deadlines, cost, and a Texas bid-to-award timeline with a checklist.
Texas Performance Bond
Project-completion guarantee, 100% of contract — Gov Code Ch. 2253.
Required on Texas public-works contracts over $100,000 — school districts, cities, counties, TxDOT, and state agencies — and paired with a payment bond. Guarantees the job gets finished 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
What it is
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.
Performance & payment
What is a performance and payment bond?
Two bonds, usually written on one application. The performance bond protects the public owner if the job isn't finished. The payment bond protects your subcontractors and suppliers, who can't put a lien on public property. Each is 100% of the contract.
| Public owner | Payment bond | Performance bond | Bid security |
|---|---|---|---|
| School district (ISD) | Over $25,000 | Over $100,000 | Set by the bid documents, usually 5% |
| City e.g. City of Houston | Over $50,000 | Over $100,000 | Set by the bid documents |
| County e.g. Harris County | Over $25,000 | Over $100,000 | May require 5% (Loc. Gov't Code §262.032) |
| State agency | Over $25,000 | Over $100,000 | Set by the solicitation |
| TxDOT | $25,000–$100,000 (payment only) | Over $100,000 | Set on the proposal form |
| Federal Miller Act | Over $150,000 | Over $150,000 | Set by the solicitation |
Texas thresholds: Gov't Code §2253.021 ("in excess of"). TxDOT: 2024 Standard Specifications, Item 3. Federal: FAR 28.102-1. A $100,000 contract does not trigger the performance bond; $100,001 does.
One wrinkle catches small contractors. Since September 1, 2025, school districts, cities, and counties only have to formally bid purchases of $100,000 or more (SB 1173). The payment-bond trigger did not move. A $60,000 school job bought from an informal quote still needs a payment bond — and a city job of the same size does not, because a city's trigger is $50,000.
| Bond | Protects | When it's due | Amount |
|---|---|---|---|
| Bid bond | The owner, if the low bidder won't sign | With your bid | Usually 5% of the bid |
| Performance bond | The owner, if the job isn't finished | After award, before work starts | 100% of the contract |
| Payment bond | Subcontractors, suppliers, and laborers | With the performance bond | 100% of the contract |
Walk through a full bid-to-award timeline, and what to send us at each step, in bid bond vs. performance bond: what changes when you win.
Who needs one
The small public jobs that call for a performance bond.
Most bonded public work in Texas isn't a new building. In public award records, 72% of small school-district projects are renovations of existing buildings, and the trades below win most of the jobs under $1 million.
HVAC and mechanical
Rooftop units, chillers, and controls for schools, state agencies, and city buildings. HVAC is the most frequent winner of small state-agency construction jobs.
Glass, storefront, and doors
School security vestibules — storefront glass, doors, and secure entries — appear in about 14% of small school-district projects, with a median near $240,000.
Roofing
Re-roofs on schools, state buildings, and city facilities. On City of Houston work, roofers often join through a job-order prime.
Renovation and remodeling
Interior renovations, restroom and ADA upgrades, and small general-contractor scopes for school districts, cities, and federal buildings.
Paving, concrete, and sidewalks
Parking lots, sidewalks, and pavement repair for counties, cities, school districts, and TxDOT maintenance contracts.
Electrical and plumbing
Lighting, generators, and plumbing work on public buildings — TDLR- or TSBPE-licensed trades bidding as the prime contractor.
Counts from public award records: USASpending.gov (FY2024–FY2025), the Texas Comptroller's Electronic State Business Daily, TxDOT lettings, and school-district project registrations, for jobs of $25,000 to $1 million.
Timing for school work: about 41% of small school-district projects start in May or June, so bids — and bonds — land from March to May. Start your bond application when you decide to bid, not when you win.
What you pay
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.
How to get bonded
Four steps, driven by prequalification.
- 01
Prequalification
For single jobs up to about $1M, our credit-based program uses your credit and a short application. Larger jobs and programs use full underwriting: CPA-prepared financial statements, a work-in-progress schedule, business history, bank line, and a 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.
First bond? Here is what goes in your first performance bond file, for both the credit-based and full-underwriting tracks.
Legal requirements
Statute, penalty, and what triggers a claim.
Statute
Texas Government Code Chapter 2253 — the Little Miller Act. §2253.021 requires a performance bond on public-works contracts in excess of $100,000, and a payment bond in excess of $25,000 ($50,000 when the owner is a city).
Penalty
100% of the contract amount. Increased by contract change orders.
Forms
AIA A312 (private commercial), SF-25 (federal), Attorney General-approved forms (state agencies), and the owner's own approved form for Houston, Harris County, TxDOT, and school districts (Gov Code §2253.021(e)).
Term
From contract signing through substantial completion and final acceptance. Warranty typically handled by a separate maintenance bond.
What triggers a claim
Declared contractor default — failure to perform, abandonment, bankruptcy, or material breach. Obligee provides notice; surety investigates and elects its completion option.
Why Surety Bond Houston
Project-ready bonding for Texas contractors.
Public-works depth
We bond for every major Texas public owner — no form or filing surprises on award day.
Growing-capacity programs
We build bonding programs that scale as your revenue grows. Not just single-job quotes.
Same-day for established clients
Once your program is set, P&P bonds issue the day your contract is signed.
Related bonds
The bonds that travel with a performance bond.
FAQ
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 §2253.021 requires a performance bond on state and local public-works contracts in excess of $100,000 — school districts, cities, counties, and state agencies alike — plus a payment bond in excess of $25,000 ($50,000 for a city). 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.
Do I need a performance bond for a school district job?
Yes, if the contract is over $100,000. Texas Government Code §2253.021 names school districts directly: a performance bond over $100,000 and a payment bond over $25,000, each for 100% of the contract. Any bid bond is set by the district's bid documents — 5% of the bid is the common figure. Summer work is bid in spring, so line up the bond before the bid is due.
Can a small contractor get a performance bond for a first public job?
Yes. Credit-based programs write many small public jobs — a school vestibule, an HVAC replacement, a re-roof — on the contractor's credit and a short application rather than audited financials. Apply when you decide to bid, not after you win: the bid bond is due with the bid, and the performance and payment bonds are often due within 10 to 15 days of award (TxDOT allows 15).
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 prequalified contractors with capacity. A first job up to about $1M goes through our credit-based program on your credit and a short application; larger programs need financials, WIP, references, and a signed indemnity agreement before bonds issue on demand. Start when you decide to bid, not after you win.
Ready when you are
Get your Texas performance bond today.
Same-day issuance for prequalified contractors. Harris County and statewide.