Bid bonds, performance bonds and prevailing wages on federal construction jobs

Two rules catch many first-time federal builders: the Miller Act bonds, and Davis-Bacon prevailing wages. Both are in almost every federal construction job of any size, and both need to be in your price.

Bonds under the Miller Act

For federal construction contracts over $150,000, the contractor must provide two bonds before work starts (FAR 28.102):

• Performance bond: protects the government if you don't finish the job. Usually 100% of the contract price.
• Payment bond: protects your subcontractors and suppliers if you don't pay them. Usually 100% of the contract price as well.

When those bonds are required, the solicitation normally also requires a bid guarantee, usually a bid bond, of at least 20% of your bid price (capped at $3 million). It shows you will sign the contract and provide the bonds if you win. Forgetting the bid bond, or sending the wrong form, gets bids rejected every week.

Corporate sureties must be approved by the U.S. Treasury (listed in Treasury Department Circular 570). Smaller contractors can also look at the SBA Surety Bond Guarantee program, which helps small businesses get bonded.

Davis-Bacon prevailing wages

The Davis-Bacon Act applies to federal construction contracts over $2,000. Laborers and mechanics working on the site must be paid at least the locally prevailing wages and fringe benefits set by the Department of Labor for that county and type of construction.

• The rates come in a wage determination attached to the solicitation. Price your labor from it, not from your usual rates.
• You must submit certified payrolls weekly, and post the wage rates on site.
• The obligations flow down to your subcontractors, and you are responsible for them.

Services are different

For service contracts such as janitorial, grounds maintenance or security, the Service Contract Act plays a similar role, with its own wage determinations. Check the attachments of any federal service solicitation for them.

Put it in the price

Bond premiums, prevailing wages, certified payroll work and the time it takes to get paid all cost money. Bidders who leave them out win jobs they lose money on. Read the full package, then use the award notices on pages like federal construction contracts to see what similar jobs actually went for.

Last reviewed October 20, 2026. This guide is general information, not legal advice. Rules and dollar thresholds change, so check the solicitation and the official sources linked above.