Bonding in Virginia

A surety bond is a 3-party promise. The contractor (the principal) pays a surety company for a bond that a customer, subcontractor, or the state (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. Virginia uses bonds differently than most states, and contractors regularly get this wrong. Keep the categories separate. 1. DPOR contractor license: no mandatory state surety bond. The Virginia Department of Professional and Occupational Regulation (DPOR) Board for Contractors does not require a blanket state surety bond to issue a Class A, B, or C contractor license. Class C applicants have no financial statement or bond requirement. Class A and Class B applicants must demonstrate financial responsibility, and the Board accepts either a financial statement or a surety bond form as proof. A Class A or B applicant who cannot or prefers not to submit a financial statement can file a surety bond in lieu of the financial statement. The bond is an alternative, not an addition. 2. Public construction payment and performance bonds (Virginia Public Procurement Act, Little Miller Act). Va. Code § 2.2-4337 requires a contractor on a nontransportation public construction contract exceeding $500,000 to furnish a performance bond and a payment bond, each in the full amount of the contract. A separate threshold of $350,000 applies to transportation projects partially or wholly funded by the Commonwealth. Va. Code § 2.2-4338 governs the form of the bond and the surety's eligibility to write business in Virginia. These bonds protect the public owner and subcontractors on that specific project. They are unrelated to the DPOR license file. 3. Mechanic's lien release bonds. Under Va. Code § 43-71, an owner or general contractor can post a bond to release a mechanic's lien from the property. This is a project-specific lien tool, not a license bond. 4. Local permit and right-of-way bonds. Counties and cities (Fairfax, Arlington, Henrico, Virginia Beach, and others) may require a permit bond or a street-cut / right-of-way bond before issuing utility, excavation, or sidewalk permits. Amounts and triggers are set by local ordinance and vary by jurisdiction. Check with the local department of public works or permit office before bidding. 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. A $50,000 Class A financial-responsibility bond at 2% is $1,000 per year. Project payment and performance bonds on a Little Miller Act job are priced per contract, usually 0.5% to 3% of the contract price depending on size, term, and credit. Bond, insurance, and workers' compensation are separate requirements. A Virginia contractor carries any financial responsibility showing DPOR requires, general liability insurance the contract or project owner requires, and workers' compensation under Va. Code § 65.2-101 once the construction-industry employee threshold is met. Confirm each requirement against the current rule before you assume you are compliant.