A performance bond typically guarantees what percentage of the contract value for public works projects?
Correct Answer
C) 100%
Performance bonds typically guarantee 100% of the contract value, ensuring that if the contractor defaults, the surety will complete the work or compensate the owner for the full contract amount.
Why This Is the Correct Answer
Performance bonds on public works projects are required at 100% of the contract value under the federal Miller Act and most state Little Miller Acts. This ensures that if the contractor defaults, the surety can fully fund project completion or compensate the owner for the entire contract amount without any gap in coverage.
Why the Other Options Are Wrong
Option A: 110%
110% is not a standard performance bond percentage. While some special bond instruments may slightly exceed 100% to account for costs of completion overhead, the standard required and tested amount is exactly 100% of the contract value.
Option B: 50%
50% would leave the owner exposed to the other half of the contract value if the contractor defaults. Most state statutes and the federal Miller Act explicitly require 100%, not 50%, precisely because partial coverage creates unacceptable risk on public projects.
Option D: 75%
75% is similarly a partial coverage amount with no basis in standard bonding law or practice. The purpose of the bond is to make the owner whole — partial coverage defeats that purpose.
Memory Technique
Miller Act = 100/100 Rule. On federal public works over $150,000, both the performance bond AND the payment bond must each be 100% of the contract. State Little Miller Acts mirror this. Think: '100% guarantee for 100% protection.'
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