Public agencies protect taxpayers, workers, and suppliers with surety bonds and strict bidding rules. Know the bid bond (at least 10% on state jobs), the payment bond (100% on contracts over $25,000), the performance bond, the stop payment notice deadlines, and the 5% retention limit.
Free practical guide
On the Spanish exam, this topic is called “Requisitos de vinculación.” It means bonding requirements, that is, requirements for surety bonds (fianzas).
A surety bond is a promise by a surety company to pay if the contractor does not keep a promise. There are three parties: the principal (the contractor), the obligee (the public agency), and the surety. On public works, bonds must come from an admitted surety insurer, which is a company authorized to do business in California (Civil Code §9554; Public Contract Code §10221).
Public works contracts are usually awarded by sealed bid to the lowest responsible bidder (for state contracts, Public Contract Code §10180). A “responsible bidder” has shown trustworthiness, quality, fitness, capacity, and experience to do the job well (§1103). The lowest price alone does not win if the bidder is not responsible. You must also be registered with DIR to bid (Labor Code §1771.1).
Worked example
Which subs must be listed?
In both cases, list subs whose work is more than $10,000.
A bid bond (fianza de licitación) promises that the winning bidder will sign the contract. On state contracts, every bid must include bidder's security of at least 10% of the bid amount: a bond from an admitted surety, cash, a cashier's check, or a certified check. A bid without security is not considered (Public Contract Code §10167). If the winning bidder does not sign the contract, the security is forfeited to the state (§10181).
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