As your projects grow, so does your risk.
A subcontractor default can lead to costly delays, budget overruns, payment disputes, and strained owner relationships. That’s why many general contractors require certain subcontractors to provide performance and payment bonds before work begins—a practice often called bonding back subcontractors.
The good news? Setting up a subcontractor bond policy doesn’t have to be complicated.
This guide walks through the process, explains what to expect, and shares best practices to help you build a program that protects your projects without creating unnecessary obstacles for qualified subcontractors.
💡 Quick Answer
A subcontractor bond policy is a structured process that requires selected subcontractors to obtain performance and payment bonds before beginning work.
To establish a successful program, you’ll typically:
- Determine which subcontractors should be bonded.
- Define your bonding requirements.
- Communicate expectations early.
- Incorporate bonding into your bidding and contracting process.
- Review and refine your program over time.
When implemented correctly, a subcontractor bond policy can reduce financial risk, improve subcontractor screening, and provide greater confidence on complex projects.
What is a subcontractor bond policy?
A subcontractor bond policy is a formal risk management strategy used by general contractors to determine when and which subcontractors should provide performance and payment bonds.
Rather than making bonding decisions on a project-by-project basis, a policy establishes consistent guidelines that can be applied across your work.
The goal isn’t to require every subcontractor to be bonded. Instead, it’s to identify situations where additional financial protection makes the most sense.
Why Contractors Create Subcontractor Bond Policies
Contractors often establish bond policies to:
- Reduce the financial impact of subcontractor defaults
- Add independent financial review through surety underwriting
- Protect suppliers and lower-tier subcontractors with payment bonds
- Improve consistency in subcontractor risk management
- Increase confidence on larger or more complex projects
- Meet owner or lender requirements when applicable
For many contractors, a bond program becomes part of a broader strategy for pursuing larger projects while managing risk more effectively.
How to Set Up a Subcontractor Bond Policy
Step 1: Decide Which Subcontractors Should Be Bonded
One of the biggest misconceptions is that every subcontractor needs to provide bonds.
In reality, many contractors only require bonds in specific situations.
Common examples include:
- New subcontractors with limited history
- Large subcontract values
- Specialty trades that could significantly impact the project schedule
- Critical scopes of work
- Higher-risk projects
- Projects with owner-required subcontractor bonding
Every contractor’s program will look a little different based on their risk tolerance and project portfolio.
💡 ZipBonds Insight
Many experienced contractors take a targeted approach rather than requiring bonds across the board. Focusing on higher-risk subcontractors often provides meaningful protection while keeping the bidding process efficient.
Step 2: Establish Clear Bonding Requirements
Before soliciting bids, determine:
- Which subcontract values require bonding
- Whether both performance and payment bonds are needed
- Any owner or contractual requirements
- Required bond amounts
- Timing for bond submission
Clear expectations reduce confusion and help subcontractors prepare before contracts are awarded.
Step 3: Communicate Requirements Early
One of the easiest ways to create unnecessary delays is waiting until after awarding the subcontract to mention bonding requirements.
Instead, communicate your expectations during the bidding process.
This gives subcontractors time to:
- Contact their surety provider
- Complete underwriting requirements
- Address questions before work begins
Early communication helps projects stay on schedule.
Step 4: Make Bonding Part of Your Standard Process
Successful bond policies are built into everyday operations.
Consider including bonding requirements in:
- Bid invitations
- Request for Proposal (RFP) documents
- Bid instructions
- Subcontract agreements
- Project kickoff checklists
The more consistent your process becomes, the easier it is for both your team and your subcontractors.
Step 5: Review and Improve Your Policy
As your business grows, your bond policy should evolve with it.
Review your program periodically by asking:
- Are we bonding the right subcontractors?
- Have project sizes changed?
- Have owner expectations changed?
- Are there recurring project risks we should address?
- Is our current process creating unnecessary delays?
Small adjustments over time can significantly improve the effectiveness of your program.
Common Mistakes to Avoid
Many contractors run into challenges because they:
- Require bonding too late in the project
- Apply the same requirements to every subcontractor regardless of risk
- Fail to communicate expectations during bidding
- Wait until a project is awarded before involving their surety partner
- View bonding as paperwork instead of a risk management tool
Avoiding these common mistakes can help your program run more smoothly.
💡 ZipBonds Insight
It’s common to hear contractors say: “We only do private work, so we don’t need a subcontractor bond policy.”
In reality, performance and payment bonds are becoming increasingly common on private construction projects—particularly for larger contracts, lender-driven projects, and when working with new subcontractors.
Having a bond policy in place before it’s required allows you to respond quickly when new opportunities arise.
Related Reading: 8 Common Mistakes Contractors Make When Bonding Back Subcontractors (and How to Avoid Them)
What should a subcontractor bond policy include?
Every company is different, but most successful programs address:
- Which subcontractors require bonding
- Required bond types
- Bond amounts
- Internal approval process
- Surety contact information to validate the bonds
- Documentation requirements
- Timeline for obtaining bonds
Having these standards documented creates consistency across projects.
How ZipBonds Helps Contractors Build Bond Programs
Whether you’re creating your first subcontractor bond policy or refining an existing one, ZipBonds helps contractors simplify the process.
Our team works with contractors to:
- Develop practical bonding strategies
- Determine when subcontractor bonding makes sense
- Help subcontractors obtain performance and payment bonds
- Reduce administrative headaches
- Keep projects moving
If you’re a contractor or subcontractor, we can also help you set up a bond program for free. It’s better to have one and never use it than to be caught off guard when you need it.
Another perk of obtaining a bond program is getting a letter of bondability from your surety company to include in bid packages. This may open doors to new relationships and expand your current ones!
Email support@zipbonds.com, message us on Live Chat, or call 888-435-4191. We also have a pre-qualification option for contractors that takes less than three minutes to complete.
Frequently Asked Questions
A subcontractor bond policy is a structured process used by general contractors to determine when subcontractors should provide performance and payment bonds before beginning work.
No. Many contractors only require bonds for higher-risk, higher-value, or unfamiliar subcontractors.
Ideally during the bidding process, before contracts are awarded. Early communication helps avoid delays.
Yes. While bonding is commonly required on public construction projects, many private owners and general contractors also require subcontractor bonds depending on the project and level of risk.
Qualified subcontractors typically work with an experienced surety provider like ZipBonds, which guides them through the underwriting process and helps secure the appropriate bonds.
Related Resources
Continue learning with these contractor guides:
- Subcontractor Default Insurance vs. Subcontractor Bonding: Which Is Right for Your Project?
- When Should General Contractors Require Subcontractor Performance Bonds?
- Your Guide to Subcontractor Bonds: When and Why to Bond Back