South Dakota Construction Bonds

In South Dakota, only electrical and plumbing contractors are licensed at the state level, which requires the purchase of a contractor license bond. Some county or city contracting authorities require general contractors to obtain a local license, which may also necessitate a contractor license bond.

South Dakota’s “Little Miller Act,” the state’s version of the federal Miller Act, requires both performance bonds and payment bonds for all public works projects, regardless of their value. However, this bonding requirement can be waived for projects valued below $25,000.

Private construction projects are not subject to South Dakota’s Little Miller Act, but private project owners may choose to protect themselves by requiring their contractors to furnish both performance and payment bonds. And both public and private project owners can make providing a bid bond mandatory for contractors in competitive bidding situations.

Other construction bonds that contractors operating in South Dakota may need to purchase include:

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

Every construction bond involves three parties—the obligee, the principal, and the bond’s guarantor, known as the “surety.” The surety’s guarantee that any valid claim will be paid is in the form of an agreement to lend the principal the funds needed to pay it, if necessary. In practice, the surety will pay the claim initially, as an extension of credit to the principal. But that doesn’t eliminate the principal’s legal obligation to pay a valid claim. It simply transforms it into the legal obligation to repay the debt to the surety in accordance with the surety’s credit terms. The surety will take legal action against the principal to recover the debt if need be.