Performance bond

A performance bond is a surety guarantee that protects the buyer if the winning supplier fails to perform: the surety pays, or arranges completion, up to the bond's value. It is demanded at contract signing, usually as a percentage of the contract price.

Where a bid bond protects the buyer against a bidder walking away, a performance bond protects delivery of the work itself — and labour and material payment bonds typically sit beside it, protecting the subcontractors and suppliers downstream. For contractors, bonding capacity is a ceiling on growth: sureties back only the contracts a firm's financials and track record can carry, so the size of work you can pursue is partly decided at the surety's desk, before any bid is written.

@misc{pi-2026-definitions-performance-bond,
  author = {{The Procurement Institution}},
  title  = {Performance bond — definition},
  year   = {2026},
  url    = {https://procurementinstitution.org/definitions/performance-bond},
  note   = {Release 2026.10}
}