Texas Contractor Bonds — License & Performance

Performance & Payment Bonds: When Projects Demand Assurance

When you bid on public work, state projects, or some large private projects, you’ll likely be asked to provide Performance and Payment Bonds under Texas law. Under Government Code Chapter 2253 (the “Texas Little Miller Act”), public work contracts exceeding $100,000 typically require a Performance Bond, and contracts over $25,000 require a Payment Bond.

• Performance Bond guarantees that you will complete the contract according to specifications.

• Payment Bond assures that subcontractors, laborers, and suppliers will be paid if you default.

Both bonds are typically in the amount of the contract value (i.e. 100%). The surety obligates itself up to that penal amount.

Recommended Bond Amounts & Premium Ranges

Because bond amounts align with contract values, your “limit” effectively is the full contract sum. But in practice:

• For public contracts over $100,000, it’s common to see 100% performance & payment bonds.

• Premiums for these bonds typically range 1% to 3% of the contract value for contractors with good credit and strong financials.

  • In riskier or credit-challenged cases, premiums may run up to 5% or more.

• For smaller private projects, owners may require partial bonds or statutory payment bonds under Texas Property Code Chapter 53 (e.g. retainage protection, subcontractor claims).

Because these bonds are contract-specific, you could have performance/payment bonds for major jobs while maintaining license bonds for local work.

Real-World Scenarios

 When It Works

A general contractor in Dallas bid a city-funded recreation center project totaling $2 million. The city required 100% performance and payment bonds. EIS Texas helped structure the bonds, and because the contractor had a solid financial track record and clean credit, the premium was 2.2%. When an unexpected subcontractor defaulted mid-project, the surety intervened, ensured continued construction, and then collected from the contractor — preserving the project and relationships.

When It Doesn’t Work

A small contractor in Houston accepted a municipal sidewalk job listed at $120,000 but neglected to secure a payment bond. Subcontractors later filed claims for unpaid work. The city voided the contract, invoked forfeitures, and the contractor was sued personally. The lack of a proper payment bond put the contractor at direct financial risk.

Additionally, many contractors incorrectly assume license bonds cover performance claims. License bonds protect consumers against violations or defaults on licensing rules — not contract completion. If you default mid-job, only a performance bond responds (if provided).

---

Why EIS Texas Helps You Bond Better

• We compare multiple surety carriers to find lowest premiums and best terms

• We assist in structuring bond capacity (how much total bonding you can support)

• We help with contract review to understand bond triggers, extensions, and statutory notice requirements (especially public works)

• We provide fast issuance so you don’t miss bid windows or permit deadlines

---

Summary & Recommended Minimums for Your Coverage

 

 Don’t let a bond gap cost you business. Get your license and performance bonds in place — request a bond evaluation and quote from EIS Texas today.

 

In the world of Texas contracting, being properly bonded is often the difference between winning work and being shut out. Skipping or underestimating bond needs can expose you to forfeitures, lawsuits, reputational damage, and disqualification from projects.

With EIS Texas as your bond partner, you’ll get:

• Expert bond placement matched to your trades

• Low costs via multiple surety options

• Clear guidance on bond thresholds and obligations

• Strong internal processes to keep your bonds valid and ready

---

Serving Contractors Across Texas

We proudly serve contractors in Dallas, Houston, Austin, San Antonio, Fort Worth and beyond.