Payment Bonds: Who They Protect, Cost, and How to Make a Claim

Who a payment bond protects

The payment bond protects people who furnish labor or materials for the project. Under A.R.S. § 34-222, the payment bond on Arizona public works is “solely for the protection of claimants supplying labor or materials” to the contractor or its subcontractors. The project owner is protected separately by the performance bond. See performance bonds vs. payment bonds for a side-by-side comparison.

Arizona payment bond requirements

Under A.R.S. § 34-222, contracts for public buildings and public works of Arizona counties, cities, towns, and many special districts require a payment bond equal to the full contract amount, issued by a surety authorized in Arizona and filed with the public body before the contract is signed.

Arizona claim notices and deadlines

Under A.R.S. § 34-223:

• Anyone who furnished labor or materials and has not been paid in full may sue on the bond.
• Claimants with no direct contract with the general contractor (for example, a supplier to a subcontractor) must give the contractor a preliminary 20-day notice and a written 90-day notice. The 90-day notice is due within 90 days after the last labor or materials were furnished and must state the amount claimed and who the work was for.
• Suit must be filed within one year after the claimant last performed labor or supplied materials.

Missing a notice or deadline can defeat a claim, so claimants should get legal advice early.

Federal Miller Act payment bonds

For federal construction contracts over $150,000, FAR 28.102-1 requires both performance and payment bonds. Under 40 U.S.C. § 3133, a claimant who contracted with a subcontractor but not with the prime contractor must give written notice to the prime contractor within 90 days after last furnishing labor or materials, and suit must be brought within one year after the last labor or materials were furnished.

How much a payment bond costs

Payment bonds are usually written together with the performance bond on the same project, and sureties often price the pair as one premium based on the contract amount. Published guides put contract bond premiums at about 0.5% to 3% of the contract amount, depending on the contractor’s finances and experience (NASBP). See our performance bond guide for examples and our surety bond cost guide for how premiums work.

Payment bond FAQs

Related guides

• Performance bonds
• Performance bond vs. payment bond
• Bid bonds
• Bid, performance, and payment bonds
• Surety bonds
• Surety bond cost
• Surety bond cost calculator
• Buy a surety bond online
• South Dakota public works bond
• West Virginia public works bond
• New Mexico public works bond
• Nebraska public works bond
• Kansas public works bond
• Iowa public works bond
• Oklahoma public works bond
• South Carolina public works bond
• Alabama public works bond
• Tennessee public works bond
• Washington public works bond
• Michigan public works bond
• Pennsylvania public works bond
• New Jersey public works bond
• Illinois public construction bond
• Georgia public works bond
• Virginia public works bond
• North Carolina public construction bond
• Ohio public improvement bond
• New York public works payment bond
• Florida public construction bond
• California surety bonds
• Texas surety bonds
• ERISA bonds
• Arizona surety bonds
• Arizona mortgage broker bond
• Arizona collection agency bond
• Arizona TPT bond for contractors
• Types of surety bonds

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