Introduction to Mississippi Performance & Payment Bonds
Performance and payment bonds are essential in Mississippi construction. A performance bond guarantees the contractor will complete the project according to the contract. A payment bond ensures subcontractors, suppliers, and laborers are paid. Mississippi requires these bonds on most public works to protect project owners and those furnishing labor and materials. This article explains how performance and payment bonds work in Mississippi, the state laws that apply, and best practices for contractors and subcontractors.
Understanding Performance Bonds
A performance bond protects the public owner (the obligee) if the bonded contractor (the principal) defaults. If the contractor fails to perform, the surety remedies the default or compensates the obligee under the bond. In Mississippi public works, the performance bond must be not less than 100% of the contract amount and must be issued by an approved surety or secured via the personal-surety cash/CD option provided by statute.
The key parties involved in a performance bond include the obligee, the principal, and the surety. The obligee is typically the project owner or the entity commissioning the work. The principal is the contractor responsible for completing the project, while the surety is the bonding company that guarantees the contractor's performance.
Understanding Payment Bonds
A payment bond guarantees payment to those supplying labor and materials to the project. On Mississippi public projects, the payment bond is also not less than 100% of the contract amount and protects subcontractors, sub-subcontractors, suppliers to those tiers, and on-site laborers. Lower-tier claimants with no direct contract with the prime must give the prime written notice within 90 days after last furnishing labor or materials.
Mississippi’s Little Miller Act
Mississippi’s “Little Miller Act” is found at Miss. Code Ann. §§ 31-5-51 to 31-5-57. It requires performance and payment bonds on public construction contracts with the state or local governments. Contracts under $25,000 may use a lump-sum payment at completion, and in that case bonds are not required. Design-build and CMAR projects must also comply with these bonding requirements.
Key points
- Bond amounts: not less than 100% of the contract for both performance and payment bonds.
- Small contracts: if the contract is less than $25,000, the public owner may opt for lump-sum payment at completion and no bond is required.
- Approved surety: surety must be on the U.S. Treasury list or a personal-surety cash/CD deposit as allowed.
Requirements for Obtaining Performance & Payment Bonds in Mississippi
Sureties evaluate the contractor’s financials, experience, and project details. Typical submissions include company financial statements, work-in-progress, resumes, bank and CPA references, and the project contract or bid info. While underwriting practices are commercial standards, the statutory requirements above govern public projects in Mississippi.
Claim Process for Performance & Payment Bonds
Performance bond claims
If the contractor defaults, the public owner notifies the surety and provides documentation of default and damages. Suit on the performance bond must be filed within one year after final payment on the contract, or within one year of abandonment or termination if earlier. Venue is where the project was performed or where service can be obtained on the principal or surety.
Payment bond claims
Those unpaid for labor or materials may claim on the payment bond. Lower-tier claimants without a contract with the prime must send written notice to the prime within 90 days after last furnishing. Suit must be filed within one year after the last day the claimant furnished labor or materials.
Common Issues and Challenges
- Notice mistakes: missing the 90-day notice for lower-tier claimants can bar a payment-bond claim.
- Documentation: lack of invoices, delivery tickets, pay apps, or proof of last furnishment slows or defeats claims.
- Scope disputes: disagreements over what was contracted or approved can complicate recovery.
Best Practices for Contractors and Subcontractors
- Use approved sureties and confirm bond forms meet Mississippi statute.
- Track notice deadlines and last-furnish dates on public jobs.
- Keep clean records: contracts, change orders, delivery tickets, certified payrolls, and correspondence.
Recap: Performance & Payment Bonds in Mississippi
Mississippi requires full contract-amount performance and payment bonds on most public works, with limited exceptions for contracts under $25,000. The statutes spell out who is protected, notice requirements, and one-year suit deadlines. Understanding these rules helps projects finish on time and ensures everyone gets paid.
FAQ Section
What is the difference between a performance bond and a payment bond?
A performance bond guarantees contract completion for the owner. A payment bond guarantees payment to subcontractors, suppliers, and laborers.
Who must obtain these bonds in Mississippi?
Prime contractors on state, county, city, or other public authority projects must furnish both bonds, except where the statute allows a lump-sum option for contracts under $25,000.
How much do the bonds cost?
Premiums are a percentage of the contract amount and depend on contractor financials and project risk; Mississippi law requires bond amounts not less than the contract price, but pricing is set by the surety market.
What are the deadlines to file suit on a bond in Mississippi?
Performance bond: within one year after final payment, or within one year after abandonment or termination. Payment bond: within one year after last furnishing by the claimant.
Do lower-tier subs and suppliers need to send notice?
Yes. If you do not have a direct contract with the prime, you must send written notice to the prime within 90 days after last furnishing to preserve a payment-bond claim.