Counties require performance bonds on most construction and public works contracts above certain amounts set by state law. The winning bidder provides the bond, usually for 100% of the contract price, before the contract is signed.
Texas example: under Government Code 2253.021, a county's public work contract must require a performance bond if it exceeds $100,000, and a payment bond if it exceeds $25,000.
What it costs
The premium is typically a small percentage of the contract value and depends on your company's financial strength and track record. Include it in your bid price.
Why it matters for winning
A county will check that you can provide the bonds before awarding. If you can't obtain them, the award goes to the next bidder and you may lose your bid bond. Know your bonding limit before you bid.