Payment Bond (Construction)

Ohio payment bonds protect subcontractors, material suppliers, and laborers who provide work or materials on public improvement projects. These parties are direct beneficiaries of the bond and can make claims against it if the prime contractor fails to pay them for their labor or materials. The bond ensures payment for "all lawful claims" as required by ORC § 153.54(B)(2).

Under ORC § 153.56, claimants must follow strict deadlines: (1) Serve a Notice of Furnishing on the prime contractor (unless the contract is $30,000 or less and directly with the prime); (2) Provide a statement to the surety within 90 days after project completion and acceptance by the public authority; (3) File a lawsuit 60 days after notice to sureties, but no later than 1 year after public authority acceptance. Missing these deadlines can result in losing your right to claim against the bond.

Ohio requires payment bonds to be 100% of the contract amount for public improvement projects. This means if the construction contract is $500,000, the payment bond must also be $500,000. For ODOT/transportation projects, the bond amount is adjustable for contract changes of $40,000 or more. Payment bonds are typically issued together with performance bonds at the same amount.