US Payment Bonds for Canadian Contractors
Americans call it a payment bond; the CCDC 222 you know at home is a labour and material payment bond. Same instrument, different rules — and on US public work it is not a backstop to lien rights, it is the right. Miss the notice window and there is nothing else to fall back on.
What Is a US Payment Bond?
A US payment bond guarantees that subcontractors and suppliers on a project get paid. The prime contractor is the principal, the public owner is the obligee, and the surety answers to the people who furnished labour and material if the prime does not. If the surety pays, it recovers from the prime under the indemnity — so for a bonded contractor this is not protection, it is exposure.
The reason it exists is the part that matters most, and it is the part Canadian contractors most often miss. A mechanics’ lien cannot attach to public property. You cannot lien a federal building, a state highway or a municipal water plant. Congress solved that by requiring the prime to post a bond, and the bond became the sole substitute for the lien rights an unpaid trade would otherwise have.
- Federal construction — a payment bond at 100 percent of the original contract price, on Standard Form 25A, required above $150,000
- Between $35,000 and $150,000 — no payment bond required, but the contracting officer must select at least two alternative protections: a payment bond, an irrevocable letter of credit, a tripartite escrow agreement, a certificate of deposit, or a deposit of specified US securities
- State and municipal work — each state’s own statute, with penal sums from half the contract price to the full amount, and notice rules that differ sharply from the federal ones
- Private work — no statute, and lien rights usually do exist. The bond is whatever the owner’s documents require, most often on the standard AIA or EJCDC form
Note the asymmetry that runs through this whole page. On US public work the bond replaces the lien. On US private work the lien survives and the bond, if there is one, sits alongside it. Which side of that line a project falls on changes the entire remedy analysis before anyone reaches the bond wording.
This bond is issued as one programme with the US performance bond and normally priced together. Federally both are written at 100 percent of the contract price, so the aggregate penalty is roughly double the contract value — against roughly 100 percent under the Canadian 50/50 convention.
Against the Form You Know
Four Ways a US Payment Bond Differs From a CCDC 222
One Hundred Percent, Not Fifty
Canadian labour and material payment bonds are conventionally written at 50 percent of the contract price. Federal US payment bonds are written at 100 percent, and can never be less than the performance bond. Massachusetts is the regional exception in the other direction — its statute sets not less than half the contract price.
Ninety Days, Not One Hundred and Twenty
The Canadian form gives an unpaid claimant without a direct contract with the principal 120 days to give notice. The federal window is 90. In Massachusetts it is 65 — and notice sent before your last day on site is void there, so the early precautionary notice that is good practice federally is actively harmful.
The Clock Runs From Your Last Day
Both regimes say “one year”, but they measure it differently. The Canadian form runs from when the principal last worked, including warranty work. The federal Act runs from when you last worked. A trade that finishes early in a long job loses years of runway simply by crossing the border.
There Is No Lien Behind It
At home an unpaid trade usually has lien rights and statutory trust protections running alongside the bond. On US public work neither exists — the bond is the whole remedy. New York is a partial exception, where a claimant may also have a lien on the public funds themselves.
The Federal Claim
Federal US Payment Bond Claims: Notice, Venue and the Clock
The federal rules are the cleanest of any US regime, and they are worth learning properly because most state statutes are variations on them rather than copies. Four things govern a federal claim: who may sue, the 90-day notice, where the action goes, and the one-year limitation.
Who May Sue
Anyone who furnished labour or material in carrying out the work and has not been paid in full within 90 days of last performing or supplying may sue on the bond. That reaches subcontractors and suppliers to the prime, and subcontractors and suppliers to a first-tier subcontractor. It does not reach further down — a supplier to a supplier is outside the protection, however commonly people describe themselves as “second tier”.
The Ninety-Day Notice
A claimant with no direct contract with the prime must give the prime written notice within 90 days of last furnishing labour or material. The notice must state with substantial accuracy the amount claimed and the name of the party to whom the material was furnished or for whom the labour was performed. It may be served by any means giving written third-party verification of delivery, or in the manner a US marshal may serve a summons. A claimant in direct contract with the prime needs no notice.
Where the Action Goes
Suit is brought in the United States District Court for any district in which the contract was to be performed and executed, regardless of the amount in controversy. Note what that means for a Canadian claimant: this is US federal court, in the district where the work was, with US counsel — and the statute is explicit that the United States is not liable for the costs of the action.
The One-Year Limitation
Action must be brought no later than one year after the day the claimant last performed labour or supplied material. Not one year from the invoice, not from the last payment, and not from project completion — from your own last day. And no suit may be brought before day 90. That combination gives a nine-month practical window, and it closes without warning.
Two more federal points worth knowing. A waiver of the right to sue on a payment bond is void unless it is in writing, signed by the person whose right is waived, and executed after that person has furnished the labour or material. A waiver signed in advance as a condition of getting the subcontract does not bind. And any person who has furnished labour or material and has not been paid may obtain a certified copy of the bond and the contract from the contracting agency — so a claimant is never in the dark about who the surety is. You can read the section at source in 40 U.S.C. § 3133.
The Obligee’s View
What the US Payment Bond Is Protecting
A Project the Owner Cannot Be Liened
Public property is not lienable, so without the bond an unpaid trade would have no security at all and would inevitably press the public owner. The bond moves that exposure onto the surety and, through the indemnity, onto the prime contractor.
A Supply Chain That Keeps Working
Trades and suppliers price public work on the assumption that a bond stands behind the prime. Remove it and either the price rises or the good subcontractors decline to bid. The bond is what makes competitive public procurement function.
Compliance With the Funding Conditions
On federally assisted projects the bonding requirement often travels with the money, so a state or municipal owner is discharging a condition of its own funding when it demands the bond. That is why the requirement rarely bends, whatever the contractor’s balance sheet looks like.
State by State
US Payment Bond Notice Traps Nearest Atlantic Canada
State statutes are not miniature Miller Acts. Across the seven states an Atlantic Canadian contractor is most likely to work in, notice windows run from 65 to 180 days, limitation periods from one year to two, the recipient changes between the prime, the surety and a government office, and the clock sometimes starts at project completion rather than at your last day. Running the federal playbook in the wrong state loses the claim outright.
Federal
Bond: 100% of contract price, above $150,000.
Notice: 90 days from your last work, to the prime.
Suit: 1 year from your last work, in US District Court.
Maine
Bond: full contract amount, above $125,000.
Notice: 90 days from your last work, to the contractor — but by registered or certified mail specifically.
Suit: 1 year from your last work.
Massachusetts
Bond: not less than half the contract price, above $25,000.
Notice: 65 days from your last work, to the prime — and notice sent early is void.
Suit: 1 year from your last work.
New Hampshire
Bond: at least 100%, above $75,000 state / $125,000 municipal.
Notice: a claim filed with a government office, within 90 days of project completion and acceptance.
Suit: 1 year from filing the claim.
Vermont
Bond: transportation work only, in the amount the Agency directs; waivable at $100,000 or less.
Notice: sworn claim filed with the Secretary within 90 days of final acceptance.
Suit: 1 year from filing.
New York
Bond: amount set by the contract; may be dispensed with under $100,000.
Notice: 120 days from your last work, to the contractor.
Suit: 1 year from completion and acceptance by the public owner — a date you must go and ask for.
Connecticut
Bond: in the amount of the contract, above $100,000.
Notice: 180 days from your last work — served on the surety, copy to the prime, and it must describe the project in detail.
Suit: 1 year from your last work.
Rhode Island
Bond: a single combined bond, 50% to 100% of contract price, above $150,000.
Notice: 90 days from your last work, to the contractor, by certified mail.
Suit: 2 years — or longer if the bond says so.
If you take one thing from this section, take this: get the bond, read it, and diarise the state’s dates the day you mobilise. Massachusetts gives you barely half the Canadian window and punishes early notice. New Hampshire and Vermont want a claim filed with a government office, so serving the general contractor accomplishes nothing. Connecticut wants the surety served, not the prime. New York starts its limitation clock on an event you will not be told about. Rhode Island quietly gives you twice as long as everywhere else. None of that is discoverable from the federal statute, and none of it is forgiving.
Both Sides of It
Two Ways a US Payment Bond Applies to You
As the Bonded Prime — This Is Exposure
Every unpaid US subcontractor and supplier on your job is a potential claimant against your surety, and every dollar the surety pays comes straight back to you under the general indemnity agreement. The bond does not protect you; it protects them, and it converts a payment dispute you might have negotiated into a claim your surety must respond to. Keep lien waivers, joint cheque arrangements and payment records in order from day one, because your surety will ask for them the moment a claim lands.
As a Claimant — This Is Your Only Remedy
If you are a Canadian subcontractor or supplier working under a US prime on public work, you cannot lien the project. The bond is it. That means obtaining a certified copy of the bond early, calendaring the state’s notice deadline from your own last day on site, sending notice in the form and to the recipient the statute names, and being prepared to sue in a US district or state court within the limitation period. Budget for US counsel before you need them, not after.
Where Claims Fail
Six Ways a US Payment Bond Claim Goes Wrong
Payment bond claims rarely fail on the merits. They fail on process — a date missed, a notice sent to the wrong party, a release signed without reading it. Every item here is avoidable with a diary and a policy.
Notice Sent Late, Early or to the Wrong Party
The three commonest failures, and all of them are fatal. Late is obvious. Early is fatal in Massachusetts, where notice before your last day is void. Wrong party is fatal in Connecticut, where it goes to the surety, and in New Hampshire and Vermont, where it is filed with a government office rather than served at all. Read the statute for the state the work is in, every time.
Being Too Far Down the Chain
Federal protection reaches subcontractors and suppliers to the prime, and subcontractors and suppliers to a first-tier subcontractor. It stops there. A supplier selling to another supplier has no claim, whatever the parties call each other. Establish where you sit in the contractual chain before you price the job, because it determines whether you have any security at all.
Releases Signed Without Reading
The largest self-inflicted wound in the whole subject. Federally a waiver of the right to sue on the bond is void unless it is in writing, signed, and executed after the labour or material was furnished — so an advance waiver in the subcontract does not bind you. But a progress-payment release signed after the fact very much does. Read every release before signing and carve out disputed and unbilled amounts expressly.
Pay-When-Paid, Retainage and Joint Cheques
A pay-when-paid clause in the subcontract is a payment-timing argument between you and the party above you; it does not on its own extend a statutory notice deadline. Retainage held to the end of the job can sit past the date your notice was due. And a joint cheque arrangement, while useful, can complicate who is owed what when the claim is finally made. Track all three against the statutory clock, not against the invoice cycle.
The discipline that prevents all of this is unglamorous. Obtain a certified copy of the bond at the start of the job — on federal work anyone who has furnished labour or material is entitled to one from the contracting agency. Calendar the state’s notice date from your own demobilisation, not from your last invoice. Send notice by the method the statute names. And if a job goes quiet, ask the public owner in writing for the date of completion and acceptance, because in New York and New Hampshire that date is what starts your clock.
US Payment Bond FAQs
A guarantee by a surety that the subcontractors and suppliers on a project will be paid if the prime contractor does not pay them. The prime is the principal, the public owner is the obligee, and the claimants are the trades and suppliers. If the surety pays a claim it recovers from the prime under the indemnity — so for the bonded contractor it is exposure, not protection.
Because a mechanics’ lien cannot attach to public property. You cannot lien a federal courthouse, a state highway or a municipal treatment plant. The payment bond is the statutory substitute for the lien rights an unpaid trade would otherwise have, which is why on public work it is the entire remedy rather than one option among several.
100 percent of the original contract price, and it can never be less than the performance bond. If the contract price increases the Government directs additional security equal to 100 percent of the increase. Bonds are required above $150,000; between $35,000 and $150,000 the contracting officer must instead select at least two alternative protections — which may include a payment bond, an irrevocable letter of credit, a tripartite escrow agreement, a certificate of deposit, or a deposit of specified US securities.
Anyone who furnished labour or material in carrying out the work and has not been paid in full within 90 days of last performing or supplying. In practice that means subcontractors and suppliers to the prime, and subcontractors and suppliers to a first-tier subcontractor. It stops there — a supplier selling to another supplier is outside the protection, no matter how the parties describe their tiers.
Federally, if you have no direct contract with the prime you must give it written notice within 90 days of your last labour or material, stating with substantial accuracy the amount claimed and the party you supplied. It may be served by any means giving written third-party verification of delivery, or as a US marshal may serve a summons. If you contract directly with the prime, no notice is required before suing.
One year from the day you last performed labour or supplied material — your last day, not the invoice date, not the last payment and not project completion. No suit may be brought before day 90 either, which leaves a practical window of about nine months. Suit goes to the US District Court for a district in which the contract was to be performed, whatever the amount in dispute.
Four ways. The penal sum is 100 percent federally against the conventional Canadian 50. The notice window is 90 days rather than 120. The one-year limitation runs from your last day rather than from when the principal last worked. And there is no lien or statutory trust sitting behind it — on US public work the bond is the whole remedy.
Massachusetts, New Hampshire, Vermont and Connecticut, for different reasons. Massachusetts allows only 65 days and treats notice sent before your last day as void. New Hampshire and Vermont require a claim filed with a government office within 90 days of project completion and acceptance, so serving the prime accomplishes nothing. Connecticut requires notice served on the surety rather than the prime, with a detailed project description — though it gives a generous 180 days.
It depends when it was signed. Federally a waiver of the right to sue on the bond is void unless it is in writing, signed by the person whose right is waived, and executed after that person furnished the labour or material — so an advance waiver buried in the subcontract does not bind you. A progress-payment release signed after the work, however, generally does. Read every release and carve out disputed and unbilled amounts expressly.
No. A pay-when-paid or pay-if-paid clause governs the timing of payment between you and the party above you in the contractual chain. It does not on its own extend a statutory notice or limitation period, which run from your last labour or material regardless of when payment was contractually due. Track the statutory clock separately from your invoice cycle.
Yes, and you should, at the start of the job rather than when a problem appears. Anyone who has furnished labour or material and has not been paid is entitled to a certified copy of the payment bond and the contract from the contracting agency. Knowing who the surety is, and what the bond’s own wording says about notice, is the single most useful piece of preparation you can do.
It is not priced separately. The payment bond is issued as one programme with the performance bond and the premium covers both. What that programme costs is driven by underwriting rather than a tariff — financial strength, work in progress, completed-job history, the banking relationship and the character of the contractor. Because both bonds are written at 100 percent federally, the real constraint is usually capacity rather than rate.
