Texas Public Works Are Bond-Required
Private Texas construction rarely requires bonding. Public construction almost always does. If you plan to bid on Texas state, county, municipal, or school district work, you'll post bonds — and the thresholds are different from federal law.
Federal Projects: The Miller Act
Federal construction contracts in Texas follow the same Miller Act rules as the rest of the country. Contracts over $150,000 require a 100% performance bond and a payment bond on a sliding scale. Federal work in Texas includes military installations (Fort Hood, Joint Base San Antonio, Dyess AFB), VA hospitals, federal courthouses, and FEMA reconstruction contracts — meaningful volume across the state.
Texas Requirements: The McGregor Act
Texas Government Code Chapter 2253 — commonly called the McGregor Act — governs bonding on Texas public works. The thresholds are lower than federal, which means more contractors get pulled into bonding requirements.
Public works contracts over $25,000 with a governmental entity require a payment bond equal to the full contract amount. Public works contracts over $100,000 require both a performance bond and a payment bond, each equal to the full contract amount.
These bonds must be executed by a corporate surety licensed to write bonds in Texas. That licensing matters — individual sureties and out-of-state unlicensed sureties are rejected.
Who Counts as a Governmental Entity
Texas defines governmental entity broadly. It includes the state, counties, municipalities, school districts, junior college districts, water districts, transportation authorities (TxDOT, DART, METRO, CapMetro), and any political subdivision of the state. If you're building or repairing infrastructure for any of these entities, McGregor Act bonding applies.
The Payment Bond Trap
Texas contractors sometimes assume the payment bond is optional or that it only protects the owner. Neither is true. The payment bond protects subcontractors and suppliers who would otherwise have mechanic's lien rights on private work. Public land generally can't be liened, so the payment bond is the replacement.
If you're a subcontractor or supplier on a Texas public works project and you don't get paid, you file a claim against the general contractor's payment bond within 90 days of last performing work or supplying materials. Miss the deadline and you lose the right to recover.
Bid Bonds in Texas
Texas does not statutorily require bid bonds on every public works project, but most state and municipal agencies require them in their bid specifications. TxDOT, for example, requires bid bonds or cashier's checks of 5% of the bid amount on virtually every project.
Bid bonds guarantee that if you win the bid, you'll actually execute the contract and post the performance and payment bonds. If you back out after winning, the bid bond pays the difference between your bid and the second-lowest bidder — up to the bond amount.
How to Qualify for Texas Bonding
Surety underwriting for Texas public works bonding evaluates three main factors: capacity (can you financially handle the project size), capability (do you have the technical expertise and track record), and character (are your financials clean and your claims history acceptable).
Practical steps to improve bondability in Texas:
- Build a relationship with a surety agent who specializes in construction, not a generalist insurance broker
- Keep audited or reviewed financial statements current (CPA-prepared matters)
- Maintain clean subcontractor relationships and pay suppliers on time
- Build a record of completed public works projects, starting with smaller municipal or school district jobs before bidding larger TxDOT or federal work
Texas surety capacity typically starts around 10 times working capital and 20 times net worth for experienced contractors. New contractors often start with project-specific bonding rather than a full line of credit.
Common Texas Public Works Bond Mistakes
- Assuming a federal Miller Act bond transfers to state projects — it does not. Different underwriters, different filing, different obligations.
- Missing the $25,000 McGregor Act payment bond threshold on what looks like a small municipal repair. The total contract value triggers the rule, not individual work orders.
- Using an out-of-state surety not licensed in Texas. The agency will reject the bond and your bid.
- Forgetting that DBE and HUB goals on Texas public works often require bonded subcontractors at lower tiers.
Getting Your First Texas Public Works Bond
If you're a licensed Texas contractor new to public works, start small: a $50,000 city of Austin sidewalk repair, a school district paving contract, a county-level maintenance project. These build your bondable track record without requiring capital commitments most new contractors can't meet.
We work with Texas contractors across Austin, San Antonio, Dallas-Fort Worth, and Houston to structure both contractor insurance and surety bonding. The same application typically supports both, so you're not duplicating financial disclosures across two brokers.