Pennsylvania Construction Bonds

In Pennsylvania, there is no licensing of contractors at the state level other than for crane operators. But some municipalities have their own licensing rules, and some of them require contractors applying for a local license or permit to provide a contractor license bond.

Pennsylvania’s “Little Miller Act,” officially called the Public Works Contractors’ Bond Law, is the state’s version of the federal Miller Act. It requires both performance bonds and payment bonds for state-funded projects valued in excess of $5,000. Each 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 not subject to Pennsylvania’s Little Miller Act. Nonetheless, many private project owners may choose to require their contractors to furnish both performance and payment bonds, especially for bigger projects. And any project owner, public or private, can require a bid bond from every bidder competing for a construction project.

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

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

The third party to a Pennsylvania construction bond agreement, in addition to the obligee and the principal, is the bond’s guarantor (known as the “surety”).

Once the surety has ascertained a claim’s validity, the principal is legally obligated to pay it. But the surety has guaranteed the payment of valid claims and typically will pay a claim initially as an extension of credit to the principal. The principal will be given a schedule for repaying that debt and must abide by the surety’s credit terms. The surety will take legal action, if necessary, to recover the debt.