Wisconsin Construction Bonds

Although no bond is required from contractors seeking licensure at the state level, some municipal or county authorities that require a local contractor license or permit may also require a contractor license bond.

Wisconsin’s “Little Miller Act” requires both performance bonds and payment bonds from contractors as a prerequisite for signing a contract for a public works or other projects funded by the state when the project value exceeds a certain dollar amount. Private construction projects don’t fall under the Little Miller Act. However, many private project owners do require performance and payment bonds from their chosen contractors. And both private project owners and government contracting officials (state or local) have the option of requiring a bid bond from each contractor in competitive bidding situations.

Other construction bonds that a contractor operating in Wisconsin may need include:

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

There are three parties to any construction bond referred to in surety bond lingo as:

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

The principal is legally obligated to pay claims the surety determines to be valid. But as the bond;s guarantor, the surety has agreed to extend credit to the principal for that purpose. In fact, the usual practice is for the surety to pay a valid claim initially and then be repaid by the principal according to the surety’s credit terms. Failing to repay the surety exposes the principal to the strong likelihood of the surety taking legal action to recover the debt.