Work out performance bond value instantly with clear inputs, formula shown and shareable results.
A performance bond is typically 5-10% of contract value, and its cost to the contractor is a bank commission charged for the whole validity period. That cost is recovered in the bid price, so requiring a larger or longer bond raises the price you pay.
Bond value
Bond = Contract value x Bond %
Bond cost
Cost = Bond value x Annual commission % x Months / 12
Indicative estimate only. Fees, entitlements, limits and formulas vary by jurisdiction, statute, policy wording and the facts of the case. This is not legal, tax, insurance or financial advice — confirm with a qualified professional or the relevant authority.
A bond preserves the contractor's cash flow and is callable on demand if unconditional, but it costs money. Retention costs nothing but ties up contractor cash.
A reducing bond that steps down at milestones lowers cost and still protects the buyer's remaining exposure. It is worth negotiating.