Which type of bond secures payment for materials and labor to suppliers?

The type of bond that secures payment for materials and labor to suppliers is known as a payment bond. This bond is specifically designed to ensure that subcontractors and suppliers are paid for their work, materials, and services provided on a construction project. It serves as a guarantee that the contractor will fulfill their financial obligations to these parties.

Payment bonds are critical in the construction industry, particularly in projects that involve public funding. They protect suppliers and subcontractors from potential non-payment issues, ensuring that they can recover costs even if the general contractor fails to pay. This fosters trust and security within the construction supply chain.

In contrast, maintenance bonds guarantee work for a specified period after project completion, performance bonds assure that the contractor will fulfill contractual obligations as stated, and bid bonds support the contractor’s ability to enter a contract if selected. Each bond type serves a distinct purpose and is important in its own right, but the payment bond specifically addresses the issue of ensuring payment for labor and materials.