What type of bond guarantees that the contractor will pay its subcontractors and suppliers?

The payment bond is specifically designed to ensure that a contractor fulfills its obligation to pay subcontractors and suppliers for the work they provide on a project. This bond offers protection to subcontractors and suppliers by guaranteeing that they will receive payment, even if the contractor fails to pay them due to financial difficulties or project issues.

This bond is critical in construction projects where multiple parties are involved, as it helps maintain trust and financial stability among all stakeholders. When a payment bond is in place, subcontractors and suppliers can work on a project with greater confidence that they will be compensated for their contributions, reducing the risk of non-payment.

In contrast, a performance bond secures the completion of a project according to the contract terms, a completed operations bond relates to liability coverage for work done after project completion, and a bid bond is typically submitted with a bid to ensure that the contractor will accept the contract if selected. None of these options directly guarantee payment to subcontractors and suppliers.