A contractor who stops showing up rarely announces it. The crew thins out, deliveries slow, and phone calls go unreturned until it becomes clear the work is not getting finished. For a project owner, that moment is expensive and stressful, but if the job was backed by a performance bond, it is also survivable. The bond exists precisely for this situation: a contractor failing to complete the work it agreed to do.
Spotting a Default
Default is not always obvious on day one. A few missed days can turn into weeks, and an owner often hesitates to pull the trigger because firing a contractor feels drastic. Watch for the practical signs instead of waiting for a formal admission. Subcontractors complaining they have not been paid is a serious one, because unpaid subs stop working and may file liens against your property. Other red flags include abandoned equipment, repeated unexplained delays, failure to pass inspections, and a contractor who suddenly becomes impossible to reach.
Before you declare a default, read your contract closely. Most agreements require written notice and a cure period, giving the contractor a defined window to fix the problem before you can act. Skipping these steps can weaken your position later, so document everything: dated photos of the site, copies of the schedule, correspondence, and payment records. That record becomes the foundation of any claim you make against the bond.
The Surety Steps In
A performance bond is a three-party arrangement among the owner, the contractor, and the surety company that issued the bond. When the contractor defaults, the surety’s obligation is triggered. Its job is to make sure the project reaches completion up to the bond’s penal sum, which is usually the full contract value. This is different from insurance you buy for yourself; the contractor pays for the bond, but the protection flows to you as the owner.
It helps to understand where the bond came from. On public work and many larger private projects in the Denver area and across Colorado, a contractor must be bonded before it can even win the job, starting with the construction bid bonds submitted during the bidding stage and followed by a performance bond once the contract is awarded. By the time a shovel hits the ground, the surety has already vetted the contractor’s finances and track record, which is part of why a surety-backed job gives an owner more recourse than a handshake deal.
Once you notify the surety of a potential default, it will investigate. Expect the surety to ask for your documentation, review the contract, and often contact the contractor to hear its side. The surety is not a charity; it will confirm that a genuine default occurred and that you held up your end, including making the payments you owed. A clean paper trail speeds this process considerably.
Filing Your Claim
Filing a claim means formally notifying the surety, in writing, that the contractor has defaulted and that you are invoking the performance bond. Send it to the address listed on the bond and keep proof of delivery. Include the signed contract, the bond itself, your notice-of-default records, the cure-period correspondence, and an accounting of what has been paid and what remains. The clearer your package, the faster the surety can respond.
Deadlines matter. Bonds and state law can impose time limits for bringing a claim, so do not sit on it once default is clear.
Getting the Project Finished
After a valid claim, the surety typically has a few ways to resolve it. It may finance the original contractor to get it back on track, hire a replacement contractor to complete the work, pay you to arrange completion yourself, or negotiate a settlement for the cost of finishing. The surety usually chooses the option that limits its exposure, but the outcome you care about is the same: the building gets finished without you absorbing the full overrun.
Completion rarely happens overnight. A new contractor needs to assess the unfinished work, price it, and remobilize, so build patience and good records into your expectations.
If you suspect your contractor is heading toward default, your single most useful next step is to pull out the bond document and read it today, before you send any notice, so you know exactly whom to contact and what the bond requires.