Payment Bond

A payment bond is a surety bond

Surety bond

A surety bond is a promise to pay one party a certain amount if a second party fails to meet some obligation, such as fulfilling the terms of a contract...

 posted by a contractor to guaranty that his subcontractors and material suppliers on the project will be paid. They are required in contracts over $30,000 with the Federal Government and must be 100% of the contract value. They are often required in conjunction with performance bonds.