Bonding in Mississippi

A surety bond is a 3-party promise. The contractor (the principal) pays a surety company for a bond that a customer, subcontractor, or a government entity (the obligee) can draw against if the contractor breaks the rules the bond covers. The surety pays valid claims up to the bond face value. The contractor then owes the surety for what the surety paid out. A bond protects the public. It is not insurance for the contractor. Mississippi uses bonds in three places that contractors commonly confuse. Keep them separate. 1. MSBOC commercial contractor license bond. Mississippi State Board of Contractors commercial licensees post a $100,000 commercial contractor license bond as a condition of licensure. This is one of the largest fixed statewide license bond amounts in the country. The bond runs to the benefit of parties harmed by the contractor's violation of MSBOC rules. Source: MSBOC (https://msboc.us/). 2. Residential contractor bond. Mississippi issues a residential contractor license for certain residential work over $50,000. Residential licensees post a bond in an amount set by MSBOC rules. Confirm the current amount and scope with MSBOC before applying. Source: MSBOC (https://msboc.us/). 3. Public works payment and performance bonds (Little Miller Act, Miss. Code Ann. 31-5-51). Mississippi's Little Miller Act (Miss. Code Ann. 31-5-51 et seq.) requires performance and payment bonds on public construction contracts. Published industry summaries indicate the threshold is $100,000. Bonds each equal 100 percent of the contract amount. The performance bond runs to the governmental entity; the payment bond protects subcontractors and suppliers. Subcontractors on a bonded public job perfect claims against the payment bond rather than lien public property. Verify the current threshold against the statute before assuming a job is bonded or unbonded. Premium math. A surety charges an annual premium, typically 1 to 3 percent of the bond face value for a contractor with strong credit and no prior claims. Weaker credit, tax liens, prior surety losses, or a new business can push the rate to 5 to 10 percent or more. A $100,000 MSBOC commercial license bond at 2 percent is $2,000 per year. Public works payment and performance bonds are priced per job, usually 0.5 to 3 percent of the contract price. Bond, insurance, and workers' compensation are separate requirements. A Mississippi contractor carries MSBOC license bonds when the commercial license applies, general liability insurance at $300,000 per occurrence / $600,000 aggregate under MSBOC rules, and workers' compensation if the business has 5 or more employees under Miss. Code Ann. 71-3-5.