Federal

Federal Contractor Bonds

Federal contract bond requirements were established by the Miller Act, passed in 1935. They apply to federally funded construction projects with a price tag of $100,000 or more in taxpayers’ money. These bonds protect the federal government and taxpayers from financial loss if a contractor fails to live up to the terms of a federal contract—by committing fraud, doing substandard work, or not completing the work, for example.

Performance & Payment Bonds

Both performance bonds and payment bonds are specifically required by the Miller Act. As the name suggests, performance bonds guarantee that a contractor’s performance will meet all contractual requirements, such as completing the work on time and meeting applicable quality standards. Delays and substandard work can result in cost overruns that waste taxpayers’ money.

If a contractor fails to meet all contractual obligations, the government agency sponsoring the project (the obligee) can file a claim against the bond. If the claim is upheld, the company that issued the bond (the surety) must pay it and will work to recover the payment from the contractor (the principal).

The Miller Act requires payment bonds because a contractor’s failure to pay workers and companies that supply materials or equipment can bring a project to a screeching halt. A payment bond guarantees that the surety will pay suppliers with valid claims against the contractor, up to the total bond amount.

Other Federal Bonds

There are a number of other types of federal bonds required for companies engaged in a wide range of businesses, including:

• Suppliers of durable medical equipment, prosthetics, orthotics, and other medical supplies (DMEPOS)
• Agricultural H-2A employers
• Transportation and freight brokers operating under the regulated by the Federal Motor Carrier Safety Commission (FMCSA)
• Airlines that distribute tickets through the Airlines Reporting Corporation (ARC)
• Ocean Transportation Intermediary (OTI) ocean freight forwarders and non-vessel-operating common carriers (NVOCCs)
• Companies operating private post offices or offering postal services
• Those acting as custodians for an incompetent beneficiary entitled to benefits from the Veterans Administration
• Livestock packers and stockyards
• Nursing homes, assisted living centers, home care agencies, and other companies that provide long-term care

Get a quote today for the federal bonds you need. If you don’t see the specific bond you need, please contact us, as we likely have it in our large book of business.