Planning & EstimatingQuestion 622 of 700
On a bonded public project, what is the distinction between a performance bond and a payment bond?
a.Both guarantee only that subcontractors are paid.
b.The performance bond pays the design fees; the payment bond pays the permit fees.
c.They are the same bond issued twice for extra coverage.
d.The performance bond guarantees completion of the work per the contract; the payment bond guarantees that subcontractors, laborers, and suppliers are paid.
Explanation
Correct: the performance bond protects the owner against the contractor's failure to complete the work as agreed, while the payment bond protects those who supply labor and materials from nonpayment (and helps keep the project lien-free on public work). The other options misstate their functions or wrongly treat them as identical.
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