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Performance Bonds in Colorado for Denver Metro Contractors
By Rob Whittet, Agency Partner | CO License #342852
A performance bond is a guarantee from a surety company that a contractor will finish a project under the terms of the contract. Colorado law requires a bond, written for at least half of the contract amount, on public works contracts above $50,000 with counties, cities, and school districts and above $150,000 with the State (C.R.S. 38-26-106). The Brokerage Insurance Group is an independent Denver metro brokerage that helps Colorado contractors qualify for and place performance bonds alongside their liability and workers’ compensation coverage.
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What a Performance Bond Guarantees on a Colorado Construction Project
A performance bond protects the project owner, called the obligee, if the contractor, called the principal, fails to finish the work as the contract requires. The surety company that issues the bond stands behind that promise. If the contractor defaults, the surety can arrange for the work to be completed or pay the owner’s loss, up to the bond amount.
A performance bond is not insurance, and the difference matters to your balance sheet. A liability policy pays covered claims and the contractor does not repay the insurer. A surety bond is a credit arrangement: the contractor pays a premium and signs an indemnity agreement promising to reimburse the surety for anything it pays out. That is why contractors often review general liability coverage and bonding in the same conversation, even though the two products work differently.
Colorado Public Works Bond Thresholds, as the Statute Reads Today
The figures in this section come from the enacted statute text, not from a summary. Under C.R.S. 38-26-106, a contractor awarded a public works contract for more than $50,000 by a county, city and county, municipality, school district, or other political subdivision must file a bond with the contracting body before starting work. For a public works contract with the State of Colorado, the threshold is more than $150,000. The bond must be written for a penal sum of not less than one-half of the total amount payable under the contract.
A companion statute, C.R.S. 38-26-105, requires a payment bond on public works contracts above $50,000 with counties, municipalities, and school districts. That bond protects the laborers and material suppliers who work under the contractor. In 2019 the General Assembly passed SB19-138, which extended these bond requirements to contracts awarded to a private entity for work on publicly owned property, whether the project uses public or private money or financing. For those contracts, the C.R.S. 38-26-106 bond applies above $150,000, and the C.R.S. 38-26-105 payment bond applies above $50,000.
Thresholds and forms can change, and each owner’s bid documents control the bond amount and the form. The Brokerage Insurance Group confirms the requirement against your bid documents before it places any bond.
When Project Owners and General Contractors Require Bonds on Private Colorado Work
On private projects the requirement usually comes from the contract rather than from statute. Project owners and general contractors ask for a performance bond when the job is large, when they have not worked with the contractor before, or when a single subcontract represents a major share of the project. The contract documents normally name the bond form, and standard forms such as AIA Document A312 are common.
Subcontractors are asked for a bond when the general contractor wants the same protection passed down the chain. Colorado’s public works statute places the bond obligation on the contractor awarded the public contract, so a subcontractor is bonded only when its subcontract, or the general contractor, requires it.
Performance Bond or Payment Bond: Who Each One Protects
A performance bond protects the owner against the contractor’s failure to complete the work. A payment bond protects subcontractors, laborers, and material suppliers against nonpayment by the contractor. Public owners in Colorado usually ask for the two together, so contractors commonly submit one application for a combined performance and payment bond.
The distinction shapes the bond amount and the claims process. A performance claim comes from the owner after a default. A payment claim comes from an unpaid supplier or subcontractor, and Colorado’s statute gives those claimants a direct right of action against the contractor and the surety under C.R.S. 38-26-105.
How Surety Underwriting Decides Whether a Contractor Gets Bonded
Surety companies evaluate a contractor’s credit, capacity, and character, the same three factors the U.S. Small Business Administration describes in its Surety Bond Guarantee program. In practice, a Colorado contractor should expect to provide current financial statements, a schedule of work in progress, references, and details of the project being bonded.
A stronger financial picture generally supports a larger bond amount. A thinner one may lead to a smaller bonding program or a request for added security. The Brokerage Insurance Group reviews the file with you before it goes to a surety, so the submission shows the contractor’s strengths and explains any weak spots up front.
What Drives the Cost of a Colorado Performance Bond
A performance bond premium is a percentage of the bond amount, and the surety sets that percentage after underwriting. No honest rate can be quoted without seeing the contractor’s file. The factors that move it are the bond amount, the contractor’s credit and financial strength, experience with similar work, the type and length of the project, current backlog, and the appetite of the surety company.
Two contractors bidding the same job can receive different pricing for those reasons alone. The Brokerage Insurance Group does not publish bond rates. A quote request gives you a number built on your own financials and your own contract.
How The Brokerage Insurance Group Places a Performance Bond, Step by Step
First, you send the bid or contract documents, the bond amount requested, and the name of the owner or general contractor asking for the bond. Second, you provide your financial statements and work-in-progress schedule, and a licensed broker reviews them with you.
Third, the broker submits the file to a surety company and answers the underwriter’s questions on your behalf. Fourth, the surety issues the bond, and the broker delivers the executed bond so you can file it with the owner before work begins.
Why Colorado Contractors Place Bonding and Insurance With One Independent Broker
Bond requirements and insurance requirements usually arrive in the same contract package, with the same deadline. The Brokerage Insurance Group is an independent brokerage, not a captive agent, so it is not limited to one company’s appetite. Rob Whittet (Colorado License #342852) and Jarrett Schinbeckler (License #313688) are the Agency Partners, and the agency holds License #604725.
Keeping bonding next to contractors insurance coverage also helps you line up limits and certificates before a contract is signed, instead of discovering a gap at bid time. The agency serves contractors across the Denver metro area and the rest of Colorado, with a 5.0 rating across 200+ 5-Star Google Reviews.
Agency License 604725. Rob Whittet 342852. Jarrett Schinbeckler 313688.
Related Coverage for Colorado Contractors
A bond sits alongside the policies that keep a contractor operating. Many contractors pair it with workers compensation insurance for crews, commercial vehicle coverage for trucks and trailers, and umbrella liability limits when a contract requires higher limits. The full list is on our business insurance lines page.
Performance Bond FAQs for Colorado Contractors
A performance bond in Colorado is a written guarantee, issued by a surety company, that a contractor will complete a construction contract as agreed. If the contractor defaults, the surety can finish the work or pay the project owner’s loss, up to the bond amount. The Brokerage Insurance Group places performance bonds for Colorado contractors and explains the underwriting steps before any application is submitted.
Colorado requires a bond on public works contracts above $50,000 with counties, cities, and school districts, and above $150,000 with the State, under C.R.S. 38-26-106. The bond must equal at least one-half of the contract amount. Contractors usually meet the requirement with a performance and payment bond, and the owner’s bid documents set the exact form, so a contractor should read the bonding clause before submitting a bid.
The cost of a Colorado performance bond depends on the surety’s underwriting, not on a flat fee. Premium is a percentage of the bond amount, and the percentage reflects the contractor’s credit, financial strength, experience, the project type and length, and the surety’s appetite. A smaller bond and a larger bond are priced from the same underwriting file. The Brokerage Insurance Group does not publish rates; call (720) 443-2886 for a quote built on your own financials.
A subcontractor needs a performance bond in Colorado only when the subcontract or the general contractor requires one. The public works statute places the bond obligation on the contractor awarded the public contract. General contractors often pass the requirement down on larger subcontracts, so a subcontractor should read the bonding clause before bidding and ask for the bond form early, because underwriting takes time.
The contractor buys the performance bond and pays the premium, and most contractors price that cost into the bid. The project owner is the protected party, called the obligee, but the owner does not purchase the bond. The contract documents state when the bond must be delivered and in what amount, and the bond is normally delivered before work begins.
A performance bond is not insurance. Insurance pays covered claims without repayment, while a surety bond is a credit arrangement in which the contractor signs an indemnity agreement to reimburse the surety for any loss it pays. The Brokerage Insurance Group places both bonds and insurance for Colorado contractors, so the two requirements can be coordinated in one conversation and checked against the same contract.
A newer or smaller Colorado contractor may qualify for a performance bond, and the U.S. Small Business Administration’s Surety Bond Guarantee program exists to help small businesses that might not otherwise be bonded. Eligibility depends on small business size standards, the contract, and the surety’s review of credit, capacity, and character. A broker can tell you which route fits before you apply.
To get a performance bond quote from The Brokerage Insurance Group, send the bid or contract documents and your current financial statements through the quote form, or call (720) 443-2886 to talk with a licensed Colorado broker. Select GET A FREE QUOTE to start, and the team typically responds within one business day with the next steps and the documents the surety will want to see.
Get a Performance Bond Quote From a Licensed Colorado Broker
Tell us about the contract, the bond amount, and your financials, and a licensed Colorado broker will tell you what the surety will need. We typically respond within one business day.
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