Technology and Software Companies
Technology and software companies pursuing government contracts face the same bond requirements as any other contractor. The Miller Act doesn’t distinguish between construction contracts and IT service agreements. Evergreen Surety places surety bonds for technology companies and software providers nationwide. Surety is all we do. Appointed with 15 surety carriers and SBA-authorized.
If you need a technology contract bond placed, please call us.
IT service providers, software development firms, systems integrators, managed services providers, and SaaS implementers run into surety bond requirements when they pursue government contracts. The requirement is the same one that applies to construction contractors. The bond types are the same. What differs is the context and the underwriting approach.
Most technology companies encounter the bond requirement mid-procurement. It’s in the solicitation document, it has a deadline attached, and the company’s existing insurance agency either can’t place it or doesn’t know how to present a technology company’s financials to a surety carrier.
Government IT Contracts Trigger the Same Bond Requirements as Construction
The Miller Act of 1935 requires bid, performance, and payment bonds on federal contracts over $150,000. The statute applies to service contracts and technology contracts as well as construction. A federal IT services agreement, a software implementation contract for a government agency, a managed services agreement for a federal department: all of these trigger the same bonding requirements as a construction project of equivalent value.
State and local government IT contracts have similar requirements under their own Little Miller Act statutes. As government agencies increase their technology procurement, more technology companies are encountering bond requirements for the first time. Most are not prepared for it.
Bid, Performance, and Payment Bonds for Technology Contracts
The three core bond types on bonded technology and software contracts are the same ones used in construction. The bond structure is the same. The underwriting criteria are the same. What changes is how the carrier evaluates a technology company versus a construction contractor and which carriers have appetite for technology company accounts.
Bid Bonds
A bid bond backs your proposal on a government IT solicitation. It guarantees to the contracting agency that if your company is selected, you will execute the contract and provide the required performance and payment bonds. The limit is typically 5% or 10% of the bid amount. A bonded solicitation will not accept a response without a bid bond.
Technology companies bidding on government IT contracts for the first time should set up a bond program before the solicitation closes rather than trying to place a bid bond at the last minute. Call us when you see the opportunity.
Performance Bonds
A performance bond guarantees your company will deliver per the contract terms: on time, to specification, and within the agreed scope. For software implementation projects, it guarantees delivery of the system as specified. For managed services agreements, it guarantees ongoing service delivery per the SLA. The limit equals the contract value.
Performance bonds are required on federal technology contracts over $150,000 and on state and local technology contracts above varying thresholds. For multi-year managed services contracts, the bond typically covers the full annual contract value and renews each year. We place performance bonds for technology service agreements across all contract types.
Payment Bonds
A payment bond guarantees that subcontractors, suppliers, and labor involved in contract delivery are paid even if the prime technology contractor runs into financial difficulty. Technology companies that use subcontractors for development, implementation, integration, or support work need payment bond coverage on public contracts where subcontractors cannot file liens against public property.
Payment bonds are issued alongside performance bonds, each equal to the contract value. For technology companies that build their delivery model around subcontractor relationships, development shops, specialized integration partners, and staffing firms, the payment bond protects those relationships on public contract work.
What Surety Carriers Actually Need from a Technology Company
A software company’s financial profile is structurally different from a construction company’s. There is no work-in-progress schedule, no job cost reports, no subcontract backlog. Revenue may be recurring and subscription-based rather than project-based. Operating history in a technology company looks different from a contractor’s track record of completed projects.
Carriers that know construction underwriting don’t always know what to do with a technology company’s financials, and a generalist agency with construction-focused carrier relationships may not know which carriers to approach for a software company account.
What Underwriters Look For
Personal and corporate credit scores come first. A strong FICO score above 675 provides access to smaller bonds without financial statements. For larger technology contracts, underwriters want to see operating history, contract references on similar scope and scale, and evidence that the company has successfully delivered comparable engagements. Cash position and available banking lines matter. For subscription-based technology companies, recurring revenue provides forward visibility that underwriters find useful: it is a form of demonstrated contract performance that translates well in a surety underwriting context.
We present technology company financials in a way that gives carriers what they need to evaluate the risk, without asking for documentation that doesn’t exist in a software company’s operating model.
SBA Surety Bond Guarantee Program for Technology Companies
The SBA Bond Guarantee Program is available to technology and software companies as well as construction contractors. A technology company with limited working capital, a short operating history, or a financial profile that doesn’t fit standard surety underwriting may qualify through the SBA program. 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 companies. If a technology company has been declined through standard surety channels, the SBA program is worth exploring before walking away from a government contract opportunity.
Financial Guarantees and Performance Assurance Beyond Standard Bonds
Technology companies face financial assurance requirements that go beyond standard government contract bonds. Software escrow arrangements may require financial assurance that source code and documentation will be accessible if the vendor fails. Data security and privacy obligations in government contracts sometimes require financial backing. Implementation performance guarantees on large technology projects can require bond-form assurance that delivery milestones will be met.
These instruments don’t always take the form of a standard bid, performance, or payment bond. Some are structured as financial guarantees. Some require surety-backed letters of credit when the obligee specifically requires an LC format. We can craft bond form language that satisfies technology contract requirements, including financial assurance arrangements that have historically only accepted letters of credit. If your technology contract has a non-standard financial assurance requirement, call us before assuming surety can’t help.
Why Technology Companies Work with Evergreen Surety
We do surety only. No insurance products competing for attention. Every carrier relationship we’ve built is focused on bonds, which means when a technology company’s financial profile doesn’t fit the construction underwriting template, we know which carriers to approach and how to present the account correctly.
We’re appointed with 15 carriers and SBA-authorized, so a technology company account isn’t limited to one carrier’s appetite. Evergreen is licensed throughout the United States and Canada with no geographic restrictions on commercial bond programs. If your current agency has told you a bond can’t be placed for a technology contract, that’s worth a second opinion.
Frequently Asked Questions
Does the Miller Act apply to technology and IT service contracts?
Yes. The Miller Act of 1935 requires bid, performance, and payment bonds on federal contracts over $150,000, including technology and IT service contracts. A federal software implementation contract, a managed services agreement for a government agency, or an IT services contract for a federal department all trigger the same bonding requirements as a construction contract of equivalent value.
What surety bonds are required on a government technology contract?
Most bonded government technology contracts require three bonds: a bid bond submitted with the proposal, and a performance bond and payment bond issued upon contract award. The bid bond is typically set at 5% or 10% of the bid amount. The performance bond and payment bond are each equal to the full contract value.
Can a software or technology company qualify for a surety bond?
Yes. Surety carriers evaluate technology companies on the same fundamental criteria as construction contractors: credit history, contract performance track record, and financial position. The underwriting process looks different because a software company’s financials look different, but qualification is achievable. For companies that don’t qualify through standard channels, the SBA Bond Guarantee Program provides an additional path.
What is the SBA Bond Guarantee Program and how does it help technology companies?
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 technology 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 companies including technology firms.
Can a surety bond replace a letter of credit on a technology contract?
In many cases, yes. Technology contracts sometimes require financial assurance in LC format, but surety bond instruments, including surety-backed letters of credit, can satisfy many of those requirements. A surety-backed letter of credit provides the obligee with an on-demand payment instrument while avoiding the restricted cash and balance sheet impact of a conventional bank LC. If your contract has a non-standard financial assurance requirement, call us before assuming surety can’t help.
What state bond thresholds apply to technology contracts?
State and local government technology contracts are subject to each state’s Little Miller Act statute. Thresholds and requirements vary by state. In Colorado, the threshold is $150,000 at the state level and $50,000 at the local level. For technology companies pursuing government contracts across multiple states, we track the applicable threshold in each jurisdiction.
Talk to Us About Your Technology Contract Bond
Whether you need a bid bond before a solicitation closes, a performance and payment bond package for an awarded government IT contract, or help understanding whether a non-standard financial assurance requirement can be met with a surety instrument, call us. Megan Burns handles all commercial surety new business.
Call Megan Burns 720-258-6182 or email at mburns@evergreensurety.com
For straightforward technology contract bonds where you have strong credit and a clear contract requirement, you can Click Here to start the process through our online portal.