Oregon Construction Bonds

In Oregon, all contractors seeking licensure by the state must furnish a contractor license bond.

Oregon’s “Little Miller Act,” the state’s version of the federal Miller Act, requires both performance bonds and payment bonds for projects valued in excess of $100,000. Each of these bonds must be in an amount equal to 100% of the contract value. The only exception is public transportation projects, for which the threshold for the bond requirement is only $50,000.

Private construction projects are exempt from Oregon’s Little Miller Act. But, many private project owners are choosing to require both performance and payment bonds from their contractors, especially for higher-value projects. And both government contracting authorities and private project owners can require a bid bond from contractors competing for a construction project.

Other construction bonds that contractors doing business in Oregon may need to purchase include:

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

Construction bonds involve three parties:

• the project owner (the obligee) requiring the bond,
• the contractor (the principal) purchasing the bond, and
• the bond’s guarantor (the surety).

Upon receipt of a claim from the obligee or other injured party, the surety will determine whether it’s valid. The principal is legally obligated to pay valid claims, but few contractors have enough liquidity to be able to pay a claim quickly. That’s why the surety’s guarantee that valid claims will be paid takes the form of an agreement to extend credit to the principal for that purpose if necessary. In fact, the surety will pay the claim on the principal’s behalf and give the principal some time to repay the resulting debt. Not repaying the debt in accordance with the surety’s credit terms typically results in the surety taking legal action to recover the claim amount, plus court costs and legal fees.