What a contract bond does, in broker terms
A contract bond is not insurance. Insurance prices in expected losses. Surety is underwritten on the expectation of no loss at all, and the contractor signs a General Indemnity Agreement that gives the surety the right to recover every dollar it pays out. That is why underwriters read financial statements the way a lender does, and why the owners of the company, and often their spouses, sign personally.
For your client, a bond is a credential. It tells an owner that a surety has looked at the contractor's balance sheet, track record and backlog and is prepared to stand behind the job. A 2025 study for the Surety Association of Canada found that a non-bonded construction company is ten times more likely to become insolvent than a bonded one. Bonded contractors tend to be the ones that last.
For you, contract surety is a way to hold an account that would otherwise walk. Contractor clients rarely leave over premium. They leave when their broker cannot get them bonded in time for a tender.
The three bonds that carry most contract work
Three instruments cover the life of a bonded project. Learn these and you can speak to most files that land on your desk.
| Bond | What it guarantees | Typical amount | Standard form |
|---|---|---|---|
| Bid bond | The bidder will enter the contract and post final security if selected | 10% of the bid (owners ask for 5% to 15%) | CCDC 220 |
| Performance bond | The contractor completes the work to the contract terms | 50% of the contract value, sometimes 100% | CCDC 221 |
| Labour and material payment bond | Subtrades and suppliers on the bonded job get paid | 50% of the contract value | CCDC 222 |
Two related documents show up at tender time. A consent of surety (also called an agreement to bond) is the surety's written commitment to issue the performance and payment bonds if the contractor wins. A pre-qualification letter confirms the contractor is bondable at the RFQ stage. Neither is a bond. Both come from the same underwriting file. See tender bonds and tender security for how they fit together.
Maintenance bonds, subdivision bonds and other variations exist. Our construction bonds guide maps each one to the stage of the project where it appears.
The 2024 CCDC bond forms
The Canadian Construction Documents Committee published new editions of CCDC 220, 221 and 222 on May 21, 2024, the first update since 2002. The forms grew from two pages to seven and tightened the claims process and response timelines. If a tender package asks for the 2024 forms, it is asking for the current standard. If it asks for an owner's own form, send it over with the file. Non-standard wording is one of the things we read for you.
Facility first, then bonds
Most of the real underwriting happens once, up front. A bonding facility is a pre-approved program that sets how much bonded work a contractor can carry on a single job and in aggregate. With a facility in place, individual bid bonds, consents and final bonds issue on request. Without one, every bond is a full review against a tender deadline.
If your client bids bonded work more than once or twice a year, set up the facility before the next tender closes. Capacity is set per contractor from the file. We do not publish limits, and no bond is guaranteed before underwriting.
Files we see most often
Approved places contract surety for general contractors, trade contractors and specialty firms across Canada outside Quebec, and into US markets through the USA bonding program. Western Canada files run through Surwest Surety Source, our Calgary-based surety division.
- The first bond. A contractor that has grown into public work and needs a bid bond for the first time.
- The fast grower. Revenue has doubled and the backlog is ahead of the balance sheet. These files need the story told properly.
- The thin balance sheet. Working capital looks light on paper. Often fixed with a better-prepared statement or a personal financial statement that shows real net worth.
- The non-standard sector. Technology, transportation, logistics and service contracts that need a performance bond but do not look like construction to the standard market.
- The decline. A file another market turned down. Hard to place usually means it went to the wrong market first, or the story was not told.
Bonds run on the tender clock
A bid bond that arrives an hour after the tender closes is worthless. If the contractor wins, the award letter usually gives a short window, often days, to deliver the performance and payment bonds and sign the contract. Plan the calendar backwards from the closing date, get the facility approved first, and bid day becomes paperwork.
Tell us the closing date in the first email. We work the file in that order.
