A payment bond is a

surety bond In finance, a surety , surety bond or guaranty involves a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults. Usually, a surety bond or surety is a promise by a surety or guarantor to pay ...

posted by a contractor to guarantee that its subcontractors and material suppliers on the project will be paid. They are required in contracts over $35,000 with the Federal Government and must be 100% of the contract value. {{cite web , url=http://farsite.hill.af.mil/vffara.htm, title=Federal Acquisition Regulation Site, accessdate=August 15, 2010 They are often required in conjunction with

performance bond A performance bond, also known as a contract bond, is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor. The term is also used to denote a collateral deposit of good faith mon ...

References

Sureties