Bonding Requirements for Federal vs. State Projects

If you’re a contractor bidding on public construction work, understanding the bonding requirements for federal and state projects is essential. While both levels of government require surety bonds to protect taxpayer-funded work, the rules, thresholds, and enforcement can vary significantly.

To stay compliant and competitive while bidding on public projects, review our practical guide to the differences between federal and state bonding requirements.

Federal Bonding Requirements: The Miller Act

What Is the Miller Act?

Federal construction projects are governed by the Miller Act, which mandates performance and payment bonds for contracts exceeding $150,000 (prior to 2010, it was $100,000).

These requirements are outlined in the Federal Acquisition Regulation (FAR) and the Code of Federal Regulations (CFR).

What Bonds Are Required to Comply With the Miller Act?

For qualifying federal projects, contractors must provide the following surety bonds to comply with the Miller Act:

• Bid bond: Bid bonds ensure that the contractor will honor their bid and provide the needed performance and payment bonds if the contract is awarded to them.  While not explicitly required in the Miller Act, eCFR 200.326 states that bidders must provide a bid guarantee equivalent to  5% of the bid amount.
• Performance bond: A performance bond guarantees that the contractor will complete the project according to the terms. When a contractor defaults, the surety will either cover the costs or find a replacement to ensure the project is completed. These bonds must be equal to 100% of the contract value.
• Payment bond: A payment bond guarantees that laborers, suppliers, and contractors are paid for their materials and work. If one of these parties isn’t paid, they can recover costs by filing a claim against the bond. Like performance bonds, payment bonds must be equal to 100% of the contract value.

These bonds are required before work begins and are strictly enforced to protect the federal government and all parties involved in the project.

State Bonding Requirements: The Little Miller Acts

What Are Little Miller Acts?

Every state has its own version of the Miller Act, with these state-specific versions commonly referred to as Little Miller Acts. 

How Are Little Miller Acts Different From the Miller Act?

Instead of mandating bond requirements for federal construction projects, these acts establish bond requirements for state-funded public works projects. For example, state or locally funded schools, bridges, and highways are covered by Little Miller Acts, meaning general contractors must meet their states’ bonding requirements before receiving a contract.

How Are Requirements for Little Miller Acts Similar to the Miller Act?

Like the Miller Act, Little Miller Acts are designed to guard state governments from unfinished work and ensure construction projects are completed. They also protect specialty contractors and suppliers from missed payments.  

How Do Little Miller Acts’ Requirements Vary by State?

Though Little Miller Acts share the goals of protecting their state governments and various parties involved in construction projects, their specific requirements vary by state. These laws  vary in terms of:

• Bond requirement thresholds: In this context, a state’s bond threshold is the minimum value of a project in the state that triggers the need for a surety bond. Some states require bonds for contracts over $25,000, while others set the bar at $100,000 or more. For example, Texas requires bonds on public projects over $25,000, while Illinois requires bonds for projects over $500,000.
• Bond value: A bond’s value refers to the maximum amount a surety company will pay if the general contractor fails to meet their obligations. Most states require performance and payment bonds to be equal to 100% of the contract value. However, some mandate lower percentages, such as Alabama which only requires a bond value of 50%.
• Notice and claim procedures: States may require preliminary notices or have specific deadlines for filing bond claims.

Each state’s requirements are unique, so contractors must review the specific bonding laws in the state where the project is located.

Key Differences Between Federal and State Bonding

What the Difference Between Federal and State Bonding Means for Contractors

If you’re bidding on public work:

• Know the thresholds: State and federal rules for bond thresholds are different, and one of the easiest ways to be denied for a contract is not meeting the required threshold. If you’re used to federal contracts but are targeting state contracts as well, make sure you know your state’s specific bond thresholds and required values.
• Prepare your bonds early: While you prepare your bid, don’t wait until the last minute to prepare your bonds. Delays in bonding can cost you the job.
• Work with a surety specialist: Since state bonding requirements can vary significantly, it can help to partner with a surety bond expert. They’ll help you navigate both federal and state requirements, ensuring you’re prepared to receive a contract.
• Stay compliant: Missing a notice or deadline can invalidate your claim rights. As a result, you should be fully aware of any compliance requirements associated with your payment and performance bonds.

Receive Miller Act-Compliant Surety Bonds From ProSure Group

At ProSure Group, we help contractors understand and meet bonding requirements for federal, state, and municipal projects. Whether you’re bidding on a DOT job or a local school renovation, our surety bond experts will guide you through the process and ensure you’re fully compliant.

📞 Call us at (800) 480-3883

 🌐 Visit us at www.prosuregroup.com

📩 Or request a consultation today by emailing Contractbonds@prosuregroup.com