Ohio Payment and Performance Bonds

What are Ohio payment and performance bonds?

Ohio payment and performance bonds are contract surety bonds that guarantee a contractor will finish a construction job and pay the people who work on it. On public improvements, Ohio's Little Miller Act (R.C. 153.54 to 153.571) handles both guarantees in a single contract bond for the full contract amount. That one bond covers the contractor's performance and the lawful claims of subcontractors, material suppliers and laborers. 

Ohio is also unusual at bid time: most bidders file a combined "bid guaranty and contract bond" for the full amount of the bid, which turns into the contract bond if they win. Each bond involves three parties: the contractor (the principal), the surety that issues the bond, and the project owner (the obligee), such as the state, a county, city, township, school district or private owner.

Key facts

Who needs Ohio payment and performance bonds?

Contractors that bid public improvements in Ohio need them. R.C. 153.54 applies to bids for any public improvement with the state or any political subdivision, district, institution or agency, which includes counties, cities, villages, townships, school districts, state universities, park districts and port authorities. 

Local laws apply the same rule once a project is large enough to be competitively bid; for counties, for example, bids over $50,000 must meet R.C. 153.54. The Ohio Department of Transportation is excluded and sets its own bond rules for highway work.

Private owners, lenders and general contractors also require these bonds by contract on commercial, multifamily and industrial work, and generals often require them from their larger subcontractors. Ohio's single contract bond carries two obligations that protect different people:

 

The bid documents control each project. Some owners, especially private owners and federal agencies, require separate performance and payment bonds with their own forms. Contractors and agents should read the solicitation before quoting.

What makes Ohio's bonds different

Ohio's bond rules differ from most states in a few ways agents and contractors should know before quoting.

• The bid bond is for the full amount of the bid. Most states ask for a 5% or 10% bid bond. In Ohio, a bidder that uses a bond files a bid guaranty for the full amount of the bid. If the bidder fails to sign the contract, its liability is capped at the difference between its bid and the next-lowest bid, or 10% of the bond, whichever is less.
• One form does double duty. The statutory "bid guaranty and contract bond" in R.C. 153.571 becomes the contract bond when the bidder signs the contract. There's no separate performance or payment bond to issue after award, which is why surety approval has to be in place before the bid goes in.
• A check option still requires a bond later. Bidders may post a certified check, cashier's check or letter of credit for 10% of the bid instead. If they win, they must then file a contract bond for the full contract amount on the R.C. 153.57 form.
• Small contractors get a bonding capacity escape hatch. On public improvements under $500,000, a bidder whose bid on another such project was already accepted may withdraw without penalty if the surety certifies in good faith that the new job would exceed its bonding capacity.
• Claimants at any tier are protected. Ohio's bond covers subcontractors, suppliers and laborers no matter how far down the chain they are, as long as they follow the notice rules.
• Notice of furnishing applies only above $30,000. Subcontractors and suppliers without a direct contract with the prime contractor must serve a notice of furnishing within 21 days of first work, but only if they furnish more than $30,000 in labor or materials. A late notice limits recovery to work done in the 21 days before it was served and after.
• Suit has a window, not just a deadline. A claimant can't sue the surety until 60 days after it furnishes its statement of the amount due, and must sue within 1 year after the owner accepts the project.
• Retainage dropped to 4%. House Bill 96 cut public retainage to a maximum of 4% for contracts signed after September 30, 2025, removed the escrow requirement and requires release within 30 days of substantial completion. Contractors can't hold a higher percentage from their subcontractors than the owner holds from them.

Bond requirements by project owner

R.C. 153.54 sets the bid guaranty and contract bond rule for nearly every Ohio public owner. Local statutes decide when a project must be competitively bid, and once it is, the 153.54 bond rules apply.

Competitive bidding thresholds for cities, townships and school districts are set in their own statutes and some are adjusted for inflation. Check the bid documents for each project.

Circle Surety's contract bond program gives contractors an instant program approval. Bid, performance and payment bonds for individual jobs are then issued under that approval in minutes. Agents can set up contract bond capacity for a client once and bond each new Ohio job as it comes.

How much do Ohio payment and performance bonds cost?

Ohio payment and performance bond premiums range from 1%-3%+ and are typically calculated on a sliding scale, where the rate steps down as the contract amount grows. In the example below, the rate typically starts at 3% on the first $100,000 of the contract price and steps down to 1% on the portion over $2,500,000, though the tiers and rates usually vary by surety. 

Because Ohio uses a single bond for both obligations, there is one premium for the contract bond. The rates below are a hypothetical example; the actual rate can only be determined after a completed application is received. Premium rates by contract amount:

 

Estimated one-time premiums for common contract amounts:

 

Estimates cover the contract bond for the life of the contract; minimum premiums vary by surety. Accepted alternates and change orders that raise the contract price raise the premium. Contracts over $2,000,000 require additional financial information.

Circle Surety can provide instant quotes for these and many other bonds through our online portal.

How to get Ohio payment and performance bonds

1. Read the bid documents. Confirm whether the owner uses the R.C. 153.571 bid guaranty and contract bond, allows a check or letter of credit, or requires its own forms.
2. Line up the bid guaranty. In Ohio the bid bond is for the full amount of the bid and becomes the contract bond if you win, so get surety approval before bid day.
3. Apply online. Fill out the application on this page, as the contractor or on your client's behalf. A soft credit check is required to determine program approval and the final premium.
4. Gather the contract details. Provide the bid or contract price, the owner's name, the project name and number, and the contractor's exact legal name as it appears on the bid.
5. Sign and pay. All contract bonds require a general indemnity agreement signed by the company and its owners. Once it is signed and the premium is paid, the bond is issued with the surety's power of attorney attached, usually in minutes.
6. Deliver the bond to the owner. File the bid guaranty with the bid. If you posted a check or letter of credit instead, file the full contract bond when you sign the contract.
7. Report change orders. Notify the surety of accepted alternates and change orders that increase the contract price so the bond amount and premium can be adjusted.

Requirement details

Bid guaranty options

Each bidder files one of three bid guaranties: a bond for the full amount of the bid, a certified check, cashier's check or irrevocable letter of credit for 10% of the bid, or electronic verification where the owner accepts electronic bids. If the low bidder fails to sign within 10 days, it and its surety owe the difference between its bid and the next-lowest bid, capped at 10% of the bid guaranty, or the cost of rebidding if the project is resubmitted.

Bond conditions and forms

The contract bond is conditioned on the contractor performing the work according to the bid, plans, details and specifications, indemnifying the owner against damages from failure to perform, and paying all lawful claims of subcontractors, material suppliers and laborers. The penal sum includes accepted alternates. Owners use the statutory forms in R.C. 153.571 and 153.57.

Surety requirements

The bond must be written by a surety authorized to do business in Ohio and approved by the officer or agent awarding the contract. Bid guaranties are payable to the public owner and held by the contracting officer.

Construction manager at risk and design-build

Construction managers at risk may be required to file a bond, letter of credit or check for the value of the construction management contract. The payment bond claim rules apply to principal contractors, which can include a construction manager at risk, and to design-build firms.

Retainage and prompt payment

For contracts signed after September 30, 2025, public owners may retain no more than 4% of each payment, no longer deposit retainage in escrow, and must release it within 30 days of substantial completion, occupancy, use or acceptance, holding back only what is needed to assure final completion. Under Ohio's prompt pay law, contractors must pay their subcontractors within 10 days of receiving payment.

Private projects and mechanics' liens

Ohio doesn't require bonds on private projects, but owners and lenders often require them by contract. On private jobs, an owner or contractor can release a recorded mechanics' lien by posting a bond with a surety, which moves the claim from the property to the bond.

Claims: what the bonds cover

• Who can claim on the performance obligation: the public owner named as obligee, after declaring the contractor in default
• Who can claim on the payment obligation: subcontractors, material suppliers and laborers at any tier who furnished labor, work or materials for the public improvement and were not paid
• Notice of furnishing: a claimant with no direct contract with the prime contractor that furnishes more than $30,000 in labor or materials must serve a notice of furnishing on the prime within 21 days of first work
• Statement of amount due: the claimant must give the surety a statement of the amount owed no later than 90 days after the contractor completes the contract and the owner accepts the improvement
• Lawsuit window: no suit until 60 days after the statement is furnished, and no later than 1 year after the owner accepts the project
• Lien on public funds: claimants may also file a separate lien against the unpaid contract funds held by the public owner, which follows its own affidavit and deadline rules
• Your obligation: a bond isn't insurance for the contractor. If the surety pays a claim, the contractor and its indemnitors must repay it. Agents should make this clear to clients before issuance

Sources

• Ohio Revised Code 153.54 — Bid guaranty to be filed with bid
• Ohio Revised Code 153.56 — Statement of amount due; notice of furnishing
• Ohio Revised Code 307.88 — County bid contents
• Ohio Facilities Construction Commission — HB 96 guidance
• Bricker Graydon — Significant changes in Ohio law for public construction projects
• Frantz Ward — Working on public projects: know your bond rights