Service Contractors
Service companies outside of construction need the same bid, performance, and payment bonds that construction contractors do. When they’re bidding on government contracts, the Miller Act applies to them too. Evergreen Surety places surety bonds for service contractors nationwide. Surety is all we do. No insurance, no competing priorities. Appointed with 15 surety carriers and SBA-authorized.
If you need a service contract bond placed, call Megan Burns directly.
Service contractors run into surety bond requirements the same way construction contractors do. A government agency issues a solicitation. The solicitation requires a bid bond. The award requires a performance bond and a payment bond. For janitorial companies, facilities management firms, security services, waste management operators, and transportation providers, this is often the first time they’ve been through the process, and their insurance agency either can’t help or doesn’t know how to present a non-construction company to a surety carrier.
The bond types are the same as construction. The underwriting criteria are the same. What differs is knowing which carriers have appetite for service company accounts and how to present a service company’s financials in a way those carriers can evaluate.
The Miller Act Applies to Service Contracts
The Miller Act of 1935 requires bid, performance, and payment bonds on federal contracts over $150,000. Most people associate that requirement with construction, but the Miller Act applies to service contracts as well. A federal janitorial contract, a facilities management agreement with a government agency, a security services contract for a federal building: all of these trigger the same bond requirements as a construction project of equivalent value.
State and local government service contracts have their own bond thresholds that vary by jurisdiction. Colorado’s threshold is $150,000 at the state level and $50,000 at the local level. Other states vary. A service company pursuing government contracts in multiple states needs an agency that tracks the threshold in each jurisdiction.
Private sector service contracts can require bonds too. Large corporate clients, healthcare systems, and educational institutions increasingly require performance bonds from their service contractors as a risk management measure, particularly on large, long-term agreements. If a private client is asking for a bond, we can place it.
Bid, Performance, and Payment Bonds for Service Contracts
The three core bond types that apply to bonded service contracts are the same ones used in construction. What changes is the context: the contract is a service agreement, not a construction project, and the carrier evaluating the bond needs to understand that distinction.
Bid Bonds
A bid bond backs your bid on a government or private solicitation. It guarantees to the contracting agency that if your company is awarded the contract, you will sign it and provide the required performance and payment bonds. The limit is typically 5% or 10% of the bid amount. Without a bid bond, your response to a bonded solicitation will not be accepted.
For service companies bidding on bonded contracts for the first time, setting up a bond program before the solicitation closes is the right move. A bid bond from an established surety program is faster and cleaner than trying to place one at the last minute. Call us when you see the solicitation, not on bid day.
Performance Bonds
A performance bond guarantees that your company will perform the service contract per its terms: on time, at the agreed price, and to the required standard. If your company defaults, the surety carrier has an obligation to respond. Performance bonds are required on federal service contracts over $150,000 under the Miller Act and on state and local contracts above varying thresholds.
The performance bond limit equals the contract value. A $500,000 annual janitorial contract requires a $500,000 performance bond. For multi-year service contracts, the bond typically covers the full contract value and renews annually. We place performance bonds for service agreements across all service industries and contract types.
Payment Bonds
A payment bond guarantees that your subcontractors, suppliers, and labor are paid even if your company runs into financial difficulty during the contract. On public service contracts, lower-tier participants cannot file liens against public property; the payment bond is their primary recourse if they are not paid.
Payment bonds are issued alongside performance bonds, each equal to the contract value. For service companies with subcontractor relationships, a janitorial company using staffing subcontractors or a facilities management firm that subs out specialized maintenance, the payment bond protects those relationships.
Service Company Financials Don't Look Like a Contractor's
Surety carriers underwrite service companies using the same fundamental criteria they use for construction contractors: character, capacity, and capital. What differs is how those metrics appear in a service company context and which carriers have appetite for service company accounts.
A janitorial company doesn’t have a work-in-progress schedule or job cost reports. A facilities management firm doesn’t have construction contracts or subcontract agreements. The financial documentation a service company produces differs from what a construction company produces, and a generalist agency that only knows construction underwriting may not know how to bridge that gap.
What Underwriters Look For in a Service Contractor
Character is measured by personal and corporate credit scores. A strong FICO score above 675 provides access to smaller bonds without financial statements. For larger service contracts, underwriters want to see operating history, contract references, and evidence that the company has successfully performed comparable contracts. Capacity is about track record: the largest contract successfully completed sets the baseline for what the carrier will support. Capital is about cash position and available banking lines.
When the credit profile is clean and the contract history is clear, the underwriting process for a service company moves faster than most expect. Call us with your contract opportunity and we can tell you quickly what the carrier will need.
SBA Surety Bond Guarantee Program for Service Contractors
The SBA Bond Guarantee Program is available to service contractors as well as construction contractors. A service company with limited working capital that has been told it doesn’t qualify through standard underwriting may find the SBA program changes that answer. The SBA multiplies available banking capacity by 20 to determine aggregate bond capacity: a company with $100,000 available on a line of credit can access up to $2 million in bonding through the program.
Evergreen is SBA-appointed and uses the program for non-construction service companies. If you’ve been declined for a service contract bond, call us before you walk away from the contract opportunity.
Why Service Companies Work with Evergreen
We do surety only. No insurance products competing for attention. Every carrier relationship and every underwriting conversation is built around bonds, which means when a service company’s financial profile doesn’t fit the standard construction template, we know which carriers to approach and how to present the account.
We’re appointed with 15 carriers. When one declines a service company account, which happens when the agency doesn’t know which carriers write this type of risk, we have real alternatives. SBA authorization gives us an additional path for service companies that don’t qualify through standard channels. Evergreen is licensed throughout the United States and Canada with no geographic restrictions on commercial bond programs.
Frequently Asked Questions
Does the Miller Act apply to service contracts, not just construction?
Yes. The Miller Act of 1935 requires bid, performance, and payment bonds on federal contracts over $150,000, including service contracts. A federal janitorial contract, a facilities management agreement, or a security services contract for a federal building all trigger the same bond requirements as a construction project of equivalent value.
What surety bonds are required on a government service contract?
Most bonded government service contracts require three bonds: a bid bond submitted with the proposal, and a performance bond and payment bond issued upon contract award. Each is equal to the contract value. The bid bond is typically set at 5% or 10% of the bid amount.
Can a service company qualify for a surety bond without construction experience?
Yes. Surety carriers evaluate service companies on the same fundamental criteria as contractors: character (credit history), capacity (contract performance track record), and capital (financial position). The underwriting process looks different because a service company’s financials look different, but the path to qualification exists. For service companies that don’t qualify through standard channels, the SBA Bond Guarantee Program is an additional option.
What is the SBA Bond Guarantee Program and how does it help service contractors?
The SBA Bond Guarantee Program allows surety carriers to bond companies that would not qualify through standard underwriting alone. The SBA multiplies available banking capacity by 20 to determine aggregate bond capacity: a service company with $100,000 available on a line of credit can access up to $2 million in bonding through the program. Evergreen is SBA-authorized and uses this program for non-construction service companies.
What state bond thresholds apply to service contracts in Colorado?
In Colorado, surety bonds are required on state service contracts over $150,000 and on local government service contracts over $50,000. Requirements in other states vary. For service companies pursuing government contracts across multiple states, we track the applicable threshold in each jurisdiction.
Can a private company require a surety bond from a service contractor?
Yes. Large corporate clients, healthcare systems, and educational institutions increasingly require performance bonds from service contractors on long-term or high-value agreements. The bond provides the client with security that the contract will be performed. We place performance bonds for private-sector service agreements as well as government contracts.
Talk to Us About Your Service Contract Bond
Whether you need a bid bond before a solicitation closes, a performance and payment bond package for an awarded government contract, or help understanding whether your service company qualifies for bonding, call us. Megan Burns handles all commercial surety new business and can tell you quickly what we need to get your bond placed.
Call Megan Burns at 720-258-6182 or email her at mburns@evergreensurety.com
For straightforward service contract bonds where you have strong personal credit and a clear contract requirement, you can Click Here to start the process through our online portal.