Bonding in construction refers to insurance-like guarantees that protect project owners if contractors fail to complete work or pay subcontractors. A bid bond guarantees a contractor will honour their bid price. A performance bond ensures the project will be completed according to specifications—if the contractor fails, the bonding company pays to have the work finished. A payment bond guarantees subcontractors and suppliers will be paid. Municipal procurement often requires bonding for major contracts, protecting taxpayers from losses if contractors default. Contractors must qualify with bonding companies, which assess their financial stability and track record before issuing bonds.