Bonding in North Dakota

A surety bond is a 3-party promise. The contractor (principal) pays a surety company for a bond that a customer, subcontractor, or a public body (obligee) can draw against if the contractor breaks the rules the bond covers. The surety pays valid claims up to the 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. North Dakota requires a statewide Contractor License for every person or entity that engages in construction work for a contract price of $4,000 or more under North Dakota Century Code (NDCC) Chapter 43-07 (Contractors). The license is administered by the North Dakota Secretary of State, not the State Electrical Board or State Plumbing Board, and is tied to proof of insurance rather than a surety bond. Bonds in North Dakota show up in 3 distinct places. Keep them separate. 1. Public works payment and performance bonds (North Dakota's Little Miller Act, NDCC 48-01.2-10). Under NDCC 48-01.2-10, the contractor on a public improvement project must furnish a contract bond (combined performance and payment bond) in an amount equal to the contract price before starting work. The bond protects both the public body (performance) and subcontractors and suppliers (payment). It must be written by a surety authorized in North Dakota. This is a project bond, not a license bond. Source: North Dakota Legislative Assembly statutes via ND Secretary of State and ND Office of Management and Budget. 2. Mechanic's-lien bonds (NDCC Chapter 35-27). A contractor or property owner can post a surety bond under NDCC Chapter 35-27 to release a construction lien from a property. The claim attaches to the bond instead of the real estate. This is a project-specific lien tool, not a license bond. 3. Municipal contractor bonds. ND cities (Fargo, Bismarck, Grand Forks, Minot, West Fargo) sometimes require a small surety bond for plumbing, mechanical, or general contractor registration. Verify with the city's building or licensing department before posting. North Dakota Contractor License. Separate from bonds, NDCC 43-07-07 requires anyone contracting for $4,000+ to hold an ND Secretary of State Contractor License. The license classes are tied to project value (Class A through Class D) and require proof of general liability insurance and workers' compensation coverage. License classes: A (no limit), B (up to $500,000), C (up to $300,000), D (up to $100,000). Verify current thresholds and insurance minimums with the ND Secretary of State Contractor License program before applying. Premium math. A surety charges an annual premium, typically 1 percent 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 percent to 10 percent or more. Public works project bonds are priced per job, usually 0.5 percent to 3 percent of the contract price. What claims look like. A homeowner, subcontractor, or public body files a complaint or sues. If the claim falls within the bond's coverage and is reduced to a judgment or administrative order, the surety pays and then pursues the contractor for reimbursement. Bond, insurance, and workers' compensation are separate requirements. A North Dakota contractor carries the ND Contractor License (with insurance proof), any applicable project or municipal bond, and workers' compensation through Workforce Safety and Insurance (WSI, the state monopoly carrier) under NDCC Title 65.