Bonding, Davis-Bacon and Other Federal Construction Requirements

Federal construction proposals include a set of requirements that commercial work usually doesn't: surety bonds with specific documentation, federal wage rules, and limits on how much work a small business can subcontract. Get any of them wrong and a well-priced proposal can be found noncompliant.

This guide covers the requirements that come up on nearly every federal construction bid.

Bonding

Bid guarantees

Sealed bids, and many negotiated construction proposals, require a bid guarantee, most often a bid bond. The standard amount is 20% of the bid price, not to exceed $3 million. It guarantees you'll accept the contract and provide the required bonds if you win.

A bid bond written as a percentage of the bid price has a practical advantage: if your price changes late in the process, the bond amount follows it, so it doesn't need to be reissued.

Performance and payment bonds

Under the Miller Act, construction contracts over $150,000 require:

• A performance bond, guaranteeing the work will be completed
• A payment bond, protecting subcontractors and suppliers

For contracts between $35,000 and $150,000, the contracting officer requires two or more alternative payment protections, such as a payment bond, an irrevocable letter of credit, or an escrow arrangement.

Bonding capacity letters

Many construction solicitations, especially MATOCs and MACCs, evaluate bonding capacity directly. They typically require a letter from your surety stating:

• Your single-project bonding limit
• Your aggregate bonding limit
• That the surety is listed on the Treasury Department's Circular 570 of approved sureties

A complete bond package often also includes the surety's power of attorney, proving the person who signed the bond can bind the surety, and sometimes a consent of surety, confirming the surety will provide the final bonds if you're awarded. Missing documentation here is an easy way to lose credibility with a contracting officer.

If bonding is a barrier

SBA's Surety Bond Guarantee Program backs bonds for small contractors on contracts up to $9 million, or up to $14 million for federal contracts with a contracting officer's certification.

Davis-Bacon prevailing wages

Federal construction contracts over $2,000 are covered by the Davis-Bacon Act. That means:

• Paying at least the prevailing wages and fringe benefits in the contract's wage determination, which comes from SAM.gov
• Submitting weekly certified payrolls (the Labor Department's WH-347 form is optional; the certification is required)
• Flowing the requirements down to subcontractors

What changed in 2026

The Labor Department's 2023 Davis-Bacon rule expanded several requirements. In late June 2026, a federal court vacated three of its provisions: coverage of certain material suppliers, coverage of delivery truck drivers for time on the job site, and automatic application of Davis-Bacon requirements to contracts missing the clauses. The rest of the 2023 rule remains. Because these rules are actively litigated, confirm the current requirements for your specific contract.

Limitations on subcontracting

On a small business set-aside, you have to do a meaningful share of the work yourself. For construction:

The cost of materials is excluded from the calculation, and work subcontracted to similarly situated firms, such as another small business on a small business set-aside, doesn't count toward the limit.

Some solicitations require you to demonstrate compliance in your price proposal. In one VA construction proposal we prepared, the solicitation said a missing demonstration could make the offer nonresponsive, and the draft didn't include one. We built it for every seed project before submission. If the solicitation asks for it, treat it like a required form.

Don't confuse this with a different change: the FAR overhaul removed the old "performance of work" clause that required primes to self-perform a set share of the work. The limitations on subcontracting for set-asides still apply.

Safety records

Many construction solicitations also evaluate safety, commonly asking for your experience modification rate (EMR) and OSHA logs for recent years. Some set a maximum EMR. Know your numbers before you bid.

Where to go from here

None of these requirements is hard on its own. The risk is missing one in a proposal full of them. If you're preparing a bid, we can review your bonding, wage, subcontracting and safety documentation against the solicitation before it goes in.