Date Published: March 24, 2025
History of Surety Bonds for Public Works Projects in the USA
Surety bonds have played a crucial role in public works projects in the United States for over a century, ensuring that contractors fulfill their obligations and protecting taxpayers from financial loss. Here’s a timeline of key developments:
Early Origins (Pre-20th Century)
- Colonial Era & Early America: Informal personal guarantees were used in construction, but no formal surety bond system existed.
- 19th Century: As infrastructure projects (railroads, canals, roads) expanded, private sureties began emerging, but bonding was not yet mandatory.
The Heard Act of 1894
- The Heard Act was the first federal law requiring contractors to post surety bonds for public projects.
- It mandated performance bonds to ensure completion and payment bonds to protect laborers and suppliers.
Limitations: The law was vague, leading to inconsistent enforcement.
The Miller Act (1935)
This was the act that propelled surety bond requirements on public works projects. Replaced the Heard Act and became the cornerstone of modern surety bonding for federal projects.
- Key Requirements:
- Performance Bonds: Guarantee project completion.
- Payment Bonds: Ensure subcontractors and suppliers are paid.
- Bid bonds guaranteeing the low bidder will enter into the contract.
- Applied to all federal construction contracts over a certain value. Initially the value was $5,000, now its $150,000+).
- Impact: Reduced fraud, improved project reliability, and set a precedent for state-level laws.
State-Level “Little Miller Acts” (Mid-20th Century)
- States adopted similar laws requiring bonds for state and municipal projects.
- Each state set its own thresholds (e.g., California requires bonds for projects over $25,000).
Growth of the Surety Industry (20th Century)
- Surety companies (e.g., Travelers, The Hartford, Liberty Mutual) became key players in underwriting bonds.
- The Surety & Fidelity Association of America (SFAA), founded in 1908, helped standardize practices.
Modern Developments (Late 20th–21st Century)
- Risk Management: Increased focus on contractor prequalification to reduce defaults.
- Alternative Bonds: Some states allow alternatives like letters of credit or self-bonding for select projects.
- Digital Surety Bonds: Electronic bonds (e-bonds) are becoming more common.
- Establishment of online surety agencies, like surety1.com.
Why Surety Bonds Matter for Public Works
- Protect Taxpayers: Ensure projects are completed without extra costs.
- Prevent Fraud & Default: Contractors must prove financial stability.
- Support Subcontractors & Workers: Payment bonds guarantee fair compensation.
Today, surety bonds remain a legal requirement for most public construction projects, ensuring accountability and financial security in infrastructure development.
About Surety1
Surety1.com is a service of AssuredPartners one of the largest and fastest growing insurance agencies in the nation. Representing over a dozen surety bond companies, Surety1.com is the premier provider of surety bonds for the construction industry, nationwide, since 2003.
About the Author
John Page started his career in the surety bond industry in 1987.
He is a former Vice President of a top 10, national surety company and the founder and former president of Surety1.
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