North Dakota Construction Bonds

In North Dakota, general contractors and certain types of specialty contractors are licensed at the state level. But, only specialty contractors must furnish contractor license bonds to the specific state licensing authority. General contractors and specialty contractors alike may be subject to local licensing and bonding requirements as well.

North Dakota’s “Little Miller Act,” the state’s version of the federal Miller Act, is formally referred to as the Mechanics’ Lien Statute. It requires contractors awarded state-funded projects with a value in excess of $100,000 to furnish both performance bonds and payment bonds, each for 100% of the contract value.

Private construction projects aren’t subject to the Little Miller Act. Still, private project owners can also require performance and payment bonds from their contractors. And both private and construction project owners may make the provision of a bid bond by each contractor a condition for bidding on a job.

Other construction bonds that contractors operating in North Dakota may need include:

• Maintenance bonds
• Subdivision/site improvement bonds
• Supply bonds
• Solar decommissioning bonds
• Right of Way bonds

Every construction bond is a legally binding agreement among three parties referred to as the:

• obligee—the project owner requiring the bond,
• principal—the contractor purchasing the bond, and
• surety—the party guaranteeing the bond.

The surety will investigate claims upon receipt and determine their legitimacy. If a claim is found to be valid, the principal is legally obligated to pay it. At the time a construction bond is purchased, the surety agrees to extend credit to the principal if it becomes necessary to pay a claim. In fact, the surety will actually pay the claimant on the principal’s behalf. The principal then must repay the resulting debt. Not doing so will most likely cause the surety to take legal action to recover the debt.