Payment and Performance Bonds

Public agencies in the State of Washington contracting for public works projects are required by RCW 39.08 to obtain a payment and performance bond, usually in the amount of 100% of the contract amount. There are three exceptions to obtaining a payment and performance bond:

1) Cities and towns may, by ordinance, require a lower percentage bond, but not less than 25% of the contract amount. The public agency picks up additional liability in doing so, but it may be helpful in encouraging smaller businesses to bid on the project.

2) For a public works contract less than $35,000, upon the contactor's request, a public agency does not have to require a payment and performance bond. Under such a situation, the public agency is then required to retain 50% of the contract amount for a) 30 days after the date of final acceptance, b) or until receipt of all releases from the Department of Revenue, prevailing wage forms approved by the Department of Labor and Industries, and settlement of any claims filed against the bond, whichever is later.

3) For a public works contract less than $35,000 using the "limited public works process" under the Small Works Roster requirements of RCW 39.04.155, the public agency may waive the requirement for the payment and performance bond. Under such a situation, the public agency assumes liability for non-payment of workers, subcontractors, and suppliers with valid claims.