Bond Closeout and Final Premium
This is the step almost everybody skips, and skipping it costs money in two directions at once.
It costs you capacity. A bond that is not formally closed out may still be consuming your aggregate limit for a job you finished eighteen months ago. That is capacity you have already earned and are not allowed to use.
It costs you premium accuracy. Premium is owed on the final contract amount, not the original. Jobs that grew mean you owe more. Jobs that shrank mean you are owed a refund — and refunds do not process themselves.
Who owns it: the same person who owns bond requests. Same register, same calendar.
When to start
At the projected completion date, which you set as a reminder on the day the bond was issued. Do not wait for the job to be fully closed with the owner — that can take another year on retention alone.
The steps
Step 1 — Confirm the work is substantially complete
You need something that establishes the job is done:
- Notice of completion, or the owner's certificate of substantial completion
- Final inspection sign-off
- Or, at minimum, your own confirmation that the field work is finished and only retention and warranty remain
Step 2 — Establish the final contract amount
This is the number the whole closeout turns on:
| Amount | |
|---|---|
| Original contract | |
| Approved change orders (add) | |
| Approved change orders (deduct) | |
| Final contract amount |
Pull it from your job cost system and reconcile it to the owner's final payment application. If those two numbers disagree, resolve it before you send anything to the surety — you do not want to true up premium twice.
Step 3 — Calculate the final premium
Run the final contract amount through the same rate table, the same tier, and the same surcharges as the original bond.
Use the final-premium mode in the bond premium calculator — it computes the original premium, the final premium, and the difference in one pass.
Worked example — the job grew
| Amount | Premium | |
|---|---|---|
| Original contract | $2,000,000 | $18,500 |
| Change orders | +$600,000 | |
| Final contract | $2,600,000 | $23,800 |
| Additional premium due | $5,300 |
Worked example — the job shrank
| Amount | Premium | |
|---|---|---|
| Original contract | $3,000,000 | $27,000 |
| Deductive change orders | −$450,000 | |
| Final contract | $2,550,000 | $23,400 |
| Return premium due to you | $3,600 |
Sureties reliably bill you for the first case. They do not always volunteer the second. Ask. A return premium is your money and it will sit unclaimed indefinitely if nobody raises it.
Step 4 — Notify the surety and request closeout
Send your producer:
- Bond number and project name
- Date of substantial completion, with supporting document
- Final contract amount, with the change order summary
- Your calculation of the final premium and the adjustment
- A request that the bond be closed and aggregate capacity released
That last line is the one that matters and the one nobody writes.
Step 5 — Reconcile against the execution report
The surety issues an execution report showing the bond, the contract amount and the premium charged. Check it against your own calculation. Discrepancies to look for:
- Final contract amount does not match yours
- Wrong rate tier applied
- A duration or design-build surcharge applied that should not have been
- Maintenance period rated twice — once in the base bond and once separately
Step 6 — Confirm the release in writing
Get written confirmation that the bond is closed and the capacity is released. Then update:
- The bond register — closeout date, final contract amount, final premium
- Your aggregate consumption figure
- The job cost record, with the premium adjustment coded to the job
Step 7 — Handle the warranty tail
Substantial completion starts the warranty clock. If there is a separate maintenance bond, it has its own expiration — log it, and close that one out too when it expires.
Note that some sureties keep a small reserve against the warranty period even after the performance bond is closed. Ask what your surety's practice is, so your aggregate math matches theirs.
Consent of surety to final payment
Many owners — especially public agencies — will not release final payment or retention without a consent of surety: a short form in which the surety agrees the final payment can be made.
- Request it from your producer as soon as you request final payment
- Usually issued at no charge
- Usually turned around in a day or two
- The owner may have their own required form — send it with the request
Ask for the consent of surety at the same time you submit your final pay application. Requesting it after the owner rejects the application costs you a payment cycle.
The quarterly sweep
Once a quarter, run this query against your bond register:
Every bond whose projected completion date has passed and whose closeout date is blank.
For each one:
| Situation | Action |
|---|---|
| Job is done, closeout never requested | Request it today |
| Job is done, requested but no confirmation | Escalate to your producer |
| Job is delayed | Update the projected completion date and reset the reminder |
| Job finished long ago, nobody remembers | Still request it. Capacity is capacity. |
Contractors who have never done this sweep routinely find several million dollars of aggregate sitting locked up in finished work. It is the cheapest capacity increase available and it requires no financial statement, no underwriter, and no negotiation.
What good looks like
- Every bond has a projected completion date in the register on the day it is issued
- Closeout starts automatically at that date
- Final premium is calculated by you, not accepted from the invoice
- Return premiums are asked for
- Aggregate consumption in your register matches the surety's number
- A quarterly sweep catches whatever slipped
Try it: Bond Premium Calculator — switch to final premium mode, enter original and final contract amounts, get the adjustment.