March 9, 2026 7:42 pm Published by Jeff Handy |

Utah’s 2026 legislative session introduced a change that may affect contractors, subcontractors, and suppliers working on state construction projects administered by the Utah Division of Facilities Construction and Management (DFCM). House Bill 508 (HB 508) modifies performance and payment bonding requirements for certain projects at DFCM’s discretion.

For many years, Utah law has required contractors on public construction projects to furnish both performance bonds and payment bonds, typically in an amount equal to the contract price. Because mechanics’ liens cannot attach to public property, payment bonds serve as the primary protection ensuring that subcontractors and suppliers are paid for labor and materials furnished on public projects.

HB 508 introduces a key change. Under the revised statute, DFCM may now elect not to require payment and performance bonds on certain government construction contracts. While bonding requirements have not been eliminated entirely, the law allows the agency to waive bonds on some projects that previously would have required them.

Why This Matters

Payment bonds historically shift the financial risk of nonpayment from subcontractors and suppliers to the surety company backing the project. If a contractor fails to pay, those providing labor and materials may pursue a claim against the surety.

If a project proceeds without a payment bond:

• Mechanics’ liens remain unavailable on public property
• Subcontractors and suppliers may have fewer remedies for nonpayment
• Recovery may depend largely on contract claims against upstream contractors

As a result, subcontractors and suppliers should no longer assume that every public construction project will include payment bond protection.

Practical Steps for Contractors, Subcontractors, and Suppliers

Participants on state construction projects may wish to consider several practical steps:

• Confirm whether a payment bond exists before entering into a subcontract or supply agreement
• Request a copy of the bond and verify the surety information if a bond is required
• Evaluate contractor creditworthiness more carefully when bond protection is absent
• Consider contractual protections, such as joint check agreements or shorter payment cycles

Looking Ahead

HB 508 introduces additional flexibility into Utah’s public construction procurement process. How frequently bonding requirements will be waived will likely depend on how DFCM implements the statute in practice.

In the meantime, contractors, subcontractors, and suppliers should take care to confirm whether payment bond protection exists before bidding and contracting to perform work on DFCM projects.

If you have questions about how HB 508 may affect your projects or payment rights, please feel free to contact us.