Bonding in Vermont

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 body (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. Vermont's bonding landscape is light at the license level and substantial at the project level. Keep these Vermont-specific bond contexts separate. 1. No statewide contractor license bond. Vermont does not require a surety bond as a condition of Master Electrician, Master Plumber, or Residential Contractor registration. The state trade boards within the Division of Fire Safety and the Residential Contractor registration through the Office of Professional Regulation condition issuance on experience, exam results, and registration filings rather than a license bond. 2. Public works: 29 V.S.A. §203 and Vermont Little Miller Act. Vermont's public-construction bond statute at 29 V.S.A. §203 requires payment security on state construction contracts. A contractor awarded a Vermont state-agency construction contract above the statutory threshold (currently $100,000 per 29 V.S.A. §203, subject to legislative update) must furnish a payment bond before work begins. Many solicitations also require a performance bond equal to 100% of the contract price. The payment bond protects subcontractors and suppliers, because mechanic's liens generally cannot attach to public property. Source: 29 V.S.A. §203 (https://legislature.vermont.gov/statutes/section/29/009/00203). 3. Vermont Agency of Transportation bonds. VAOT construction contracts require bid, performance, and payment bonds under the Agency's Standard Specifications. Performance and payment bonds on VAOT contracts are typically 100% of the contract price. Source: Vermont Agency of Transportation (https://vtrans.vermont.gov/). 4. Private construction: mechanic's lien. On private Vermont projects, subcontractors and suppliers rely on the mechanic's lien procedure under 9 V.S.A. Chapter 51 rather than a contractor license bond. An owner may post a bond to discharge or release a lien; that is a project-specific lien tool, not a license bond. Source: 9 V.S.A. Chapter 51 (https://legislature.vermont.gov/statutes/chapter/09/051). 5. Workers' compensation self-insurance. An employer that elects to self-insure for workers' compensation under 21 V.S.A. §687 must file security with the Vermont Department of Labor, which may include a surety bond. Standard practice is to carry workers' compensation through a licensed carrier; self-insurance is reserved for very large employers. Source: Vermont Department of Labor, Workers' Compensation (https://labor.vermont.gov/workers-compensation). Premium math. A surety charges an annual premium, typically 1% to 3% 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% or more. Project performance and payment bonds on Vermont public-works contracts are priced per job, usually 0.5% to 3% of the contract price. Bond, insurance, and workers' compensation are separate requirements. A Vermont contractor typically carries general-liability insurance appropriate to the trade, commercial auto, and workers' compensation under 21 V.S.A. Chapter 9. Bonding is a per-project requirement on public work and specific private contracts. Verify each requirement against the current statute and the contract before you assume you are compliant.