How Does A Performance and Payment Bond Work?

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For example, if the lowest Most contractors try to avoid losing this money so it seldom happens that they refuse to fulfill the contract. Aside from the bid bond, the contractor will have to secure a performance bond and a payment bond. These two will guarantee that the project will be done according to what has been specified in the agreement and will be finished on the date that it is supposed to be finished. What is a performance bond and payment bond? A performance bond is a protection for private entities or the Federal Government for whatever projects that they build.