Public vs. Private Construction Projects: When Do You Need a Contract Surety Bond?

One of the most common questions contractors ask is whether a specific project actually requires a contract surety bond. The answer depends heavily on whether the project is public or private, and increasingly, private owners are asking for bonds too, even when they aren't legally required.

On federal public works projects, the Miller Act requires performance and payment bonds on any contract exceeding $150,000. Because subcontractors and suppliers cannot file a mechanic's lien against government property, the payment bond is their only real protection if the general contractor fails to pay. Most states have adopted similar 'Little Miller Act' statutes governing state and municipal public works projects, though thresholds and requirements vary by state.

Private construction projects are not subject to these statutory bonding requirements, which means bonding is determined by the project owner, lender, or general contractor rather than by law. That said, bonding on private projects has become increasingly common, particularly for larger developments, projects financed by institutional lenders, and jobs where the general contractor wants the added assurance of a bonded subcontractor base.

Lenders in particular often require performance and payment bonds as a condition of construction financing, since the bond protects their investment against the risk of a contractor default mid-project. Even when not required, being bond-ready signals financial credibility to private owners and can be a competitive advantage when bidding against unbonded competitors.

Whether you're pursuing your first federal contract or bidding on a privately financed development, understanding the bonding landscape ahead of time avoids delays. Machaen Insurance Agency helps contractors determine exactly what bonding a specific project requires and get the right bid, performance, and payment bonds in place before the deadline.