When public projects require bonds: the Miller Act and Little Miller Acts

Public work is where most contractors first hit a hard bonding requirement. Not a preference from an owner, not a line an insurance broker suggested, but a statute that says no bond, no contract.

Two layers of law create it. The Miller Act covers federal construction. State Little Miller Acts cover state and local public work. They rhyme, but they are not identical, and the differences matter on bid day.

What the Miller Act requires

The Miller Act, codified at 40 U.S.C. sections 3131 through 3134, governs bonding on federal construction contracts. The Federal Acquisition Regulation implements it, and the practical thresholds come from there:

• Over $150,000. Both a performance bond and a payment bond are required.
• Between $35,000 and $150,000. An alternative form of payment protection applies instead of a full payment bond.

Each bond is written at 100 percent of the original contract price. That number surprises contractors the first time they see it, so it is worth separating two things that sound alike. The bond amount is the full contract price. The premium you pay is a small percentage of it.

Bonds are furnished before the contract is awarded, which is why the sequence starts well before you win anything.

Why federal jobs need payment bonds at all

You cannot place a mechanics lien on federal property. That single fact is the reason the Miller Act exists.

On private work, an unpaid subcontractor or supplier has the lien as leverage. On a federal job that remedy is gone, so the payment bond replaces it. Unpaid first tier subcontractors and suppliers claim against the bond, and second tier claimants who contracted with a first tier subcontractor can claim as well.

For the prime contractor, the practical consequence is that your payment discipline down the chain becomes a bonded obligation, not a private dispute. The payment bonds page covers how claims work.

Little Miller Acts on state and local work

Every state has its own version covering state, county, and municipal projects. The structure is familiar: public work over a dollar threshold requires payment and performance bonds.

The thresholds and the details vary by state, and some agencies set requirements stricter than the statute floor. Read the solicitation for the specific job, and check the state statute it cites. Do not assume the federal $150,000 number carries over, because in many states it does not.

Private work sits outside both. Plenty of private owners and general contractors still require payment and performance bonds, they do it by contract rather than by statute, and the bonds themselves are the same instruments.

The bid bond comes first

Before either bond is in play, the invitation to bid usually asks for a bid bond, commonly at 5, 10, or 20 percent of the bid amount. It guarantees that if you win, you sign at your price and produce the performance and payment bonds.

Failing to produce them after winning is what a bid bond claim is for, which is why sureties want to see the whole path approved before they issue the first piece of it. The bid bond calculator estimates the bond amount and premium from your contract value.

What the bonds cost on a public job

Performance and payment bonds are issued together under a single premium, which typically runs 1 to 3 percent of the contract value. Your rate depends on your financials, your contracting history, and the size of the job, not on whether the owner is public or private.

If the bond is backed by the SBA Surety Bond Guarantee Program, the guarantee fee is 0.6 percent of the contract price on performance and payment bond guarantees. Bid bond guarantees carry no fee.

For how the rate itself gets set, see what drives contractor bond pricing.

If you are a small contractor bidding federal work

The SBA Surety Bond Guarantee Program exists to get small contractors onto exactly these projects.

The SBA guarantees 90 percent of the surety's loss on contracts up to $100,000, and on contracts awarded to economically disadvantaged small businesses, HUBZone businesses, 8(a) businesses, and veteran-owned small businesses. Other contracts carry an 80 percent guarantee. Guaranteed bonds go up to $9 million, and up to $14 million on federal contracts when a federal contracting officer certifies that the guarantee is in the government's interest.

You have to qualify as a small business under the SBA size standards for your industry. The SBA Surety Bond Guarantee Program page covers eligibility and how CapStream uses the guarantee.

Get bond-ready before the bid date

The bonds themselves are fast. Once you are approved, a bid bond issues as fast as 1 hour and performance and payment bonds as fast as same day. Turnaround depends on complete information and underwriting review. The approval before that is what takes time, and bid day is a bad time to start it.

Set up a bonding line first, then pull bonds project by project, up to $10 million with no minimum. For the upfront costs that land before your first payment application, including the bond premiums themselves, mobilization funding covers up to 20 percent of the contract price.

This article is general information about bonding requirements, not legal advice. Confirm the requirement for your project in the solicitation and the contract documents.