IT Performance Bonds for Government Technology Contracts

No. The Miller Act (40 USC 3131-3134) applies only to construction, alteration, or repair of public buildings and works. IT contracts are classified as service contracts under FAR Part 39 (Acquisition of Information Technology). However, contracting officers can require performance bonds on IT service contracts under FAR 28.103-2 when government property or funds are provided to the contractor, or when the officer determines a bond is necessary. This happens most often with large system implementations where the agency makes substantial progress payments.

Federal IT contracts under $250,000 rarely require performance bonds. Bonds become common on contracts from $500,000 to $5 million, especially for ERP implementations, custom software development, and critical infrastructure projects. DOD and DHS are more likely to require bonds than civilian agencies. State governments vary widely, with some requiring bonds on all IT contracts over $100,000.

IT companies face unique underwriting challenges because they typically lack hard assets. Sureties focus on recurring revenue (SaaS, managed services), contract backlog, technical team retention, and delivery track record. A $2M/year MSP with 90% client retention and stable engineers is a stronger bond candidate than a $10M project-based firm with high turnover. Prepare a project completion matrix showing on-time, on-budget delivery history.

Yes, but capacity will be limited. New IT companies typically qualify for bonds on contracts up to $250,000-$500,000. The SBA Surety Bond Guarantee Program covers contracts up to $6.5 million and guarantees up to 90% of the bond. Key factors: the principals' individual technical experience (even from previous employers), personal credit scores above 680, and available working capital. Having a subcontractor with bonding history on the project can also help.

An E&O policy (professional liability insurance) covers claims arising from negligent acts, errors, or omissions in your professional services. A performance bond guarantees you will complete the contract according to its terms. E&O pays for damages from mistakes; a performance bond pays for a replacement contractor if you abandon or fail to complete the project. Government agencies often require both. E&O premiums are based on your revenue; bond premiums are based on the specific contract value.

For contracts under $500,000 with established companies: 3-5 business days. For contracts from $500,000 to $2 million: 1-2 weeks. For contracts over $2 million: 2-4 weeks, as the surety will conduct a detailed financial review. Have your CPA-prepared financial statements, tax returns, and a project portfolio ready before you submit. Starting the bond application before you need it for a specific bid gives you the most flexibility.