Does a Texas county have to make a contractor carry performance and payment bonds on a road or bridge project, or can the county waive that requirement?

Plain-English summary

Sterling County hired a road construction company to build roads in phases, and required performance and payment bonds in increments matching the phases, as the Government Code requires. Then the company went insolvent and could not finish. The county lined up a different company to complete the bonded phase and the remaining phases, but wanted to do the remaining phases without requiring new performance or payment bonds. The county attorney asked the Attorney General: can a county waive the bond requirement?

The AG said no. Government Code section 2253.021(a), part of what is historically called the McGregor Act, says a governmental entity that enters a qualifying public work contract "shall require" the prime contractor to execute a performance bond (for contracts over $100,000) and a payment bond (for contracts over $25,000) before work begins. The word "shall" imposes a mandatory duty. A county is a "governmental entity" under the Act, and Texas courts have long treated road and bridge construction as "public work."

The AG reinforced this two ways. A performance bond exists to protect the governmental entity and guarantee completion, exactly the protection Sterling County lost when its contractor went broke. A payment bond protects subcontractors, laborers, and materialmen, who generally lack lien rights on public projects, and the Act makes a governmental entity that fails to obtain a payment bond liable as if it were the surety. Reading the requirement as optional would defeat the Legislature's purpose and leave both governments and subcontractors unprotected.

Finally, the AG addressed an older opinion (JM-0505, 1986) that had noted some courts treating the predecessor statute (article 5160) as non-mandatory where counties chose to waive the requirement. The AG explained that later decisions, including the Texas Supreme Court in Heldenfels Bros., settled that article 5160 imposed a statutory duty, so those earlier cases do not reflect the law. The AG overruled JM-0505 to the extent it conflicts.

What this means for you

If you are a county official or county attorney

On a qualifying public work contract, you do not have discretion to skip the bonds. Build the performance and payment bond requirement into the contract before work starts: a performance bond if the contract exceeds $100,000, and a payment bond if it exceeds $25,000. When a project is rebid or handed to a replacement contractor, treat the new contract the same way. The AG's reasoning, driven in part by Sterling County's own loss to an insolvent contractor, is that these bonds are the protection the statute guarantees, and waiving them exposes the county.

If you are a prime contractor on a public project

Expect to post both bonds before you begin a qualifying job. The performance bond backs your completion of the work; the payment bond backs payment to your subcontractors and suppliers. A county cannot lawfully agree to let you skip them on a covered contract.

If you are a subcontractor, laborer, or materialman

The payment bond is your safety net, because on public projects you generally cannot file the kind of lien you could on a private job. The AG underscored that the payment bond requirement is mandatory, and that if a governmental entity fails to obtain the bond, it becomes liable to you "the same" as a surety would have been under sections 2253.027(a) and 2253.022(f).

If you are a surety company

This opinion confirms that the demand for these bonds on covered public work contracts is not waivable by the contracting entity, which is relevant to how these bonds get written and incremented across phased projects like the one described here.

Common questions

Q: Can a Texas county waive performance or payment bonds on a road project?
A: No. Section 2253.021(a) says the entity "shall require" the bonds, which the AG read as a mandatory duty. The county is not free to disregard it.

Q: What dollar thresholds trigger the bonds?
A: A performance bond is required for a public work contract exceeding $100,000 (§ 2253.021(a)(1)), and a payment bond for one exceeding $25,000 (§ 2253.021(a)(2)(A)). For a municipality or joint airport board, the payment-bond threshold is $50,000 (§ 2253.021(a)(2)(B)).

Q: Do these bonds apply to road and bridge work specifically?
A: Yes, when the contract meets the dollar threshold. The Act covers a "public work contract," and Texas courts have applied that to road and bridge construction. The AG did not decide whether any particular project qualifies as public work; that was not asked.

Q: What happens if a county fails to get a payment bond?
A: Under sections 2253.027(a) and 2253.022(f), the governmental entity is subject to the same liability a surety would have had if it had issued the payment bond and the entity had obtained it.

Q: Does the older AG opinion saying counties could waive the bond still apply?
A: No. The AG overruled Opinion JM-0505 to the extent it is inconsistent with this opinion, explaining that later case law, including the Texas Supreme Court, established the requirement as a statutory duty.

Background and statutory framework

Chapter 2253 of the Government Code, "historically called the McGregor Act" (Dealers Electric Supply Co. v. Scroggins Construction Co.), governs performance and payment bonds on public work contracts. Section 2253.021(a) requires a governmental entity that enters a public work contract over the relevant threshold to require the prime contractor to execute the bonds before beginning work. A county is a "governmental entity" (§ 2253.001(1)(A)); a "public work contract" is a contract for carrying out or completing any public work (§ 2253.001(4)); and a "prime contractor" is a person, firm, or corporation that makes a public work contract with a governmental entity (§ 2253.001(3)).

To decide whether "shall require" is mandatory or merely directory, the AG applied the Texas courts' framework (AC Interests v. TCEQ, Albertson's v. Sinclair): look to the plain meaning, the act's nature and object, and the consequences of each reading, and note that provisions for the public good are generally mandatory. "Shall" presumptively imposes a duty (Gov't Code § 311.016(2)). The performance bond protects the governmental entity and guarantees completion (§ 2253.021(b)(1), (b)(3)); federal and state courts have described it as mandatory (Hartford Fire Insurance v. City of Mont Belvieu). The payment bond protects subcontractors and suppliers (§ 2253.021(c)), and the Act attaches a consequence for failing to obtain it (§§ 2253.027(a), 2253.022(f)), which confirms it is mandatory.

The opinion also corrects the historical record. The predecessor statute, article 5160, was repealed in 1993 and recodified into the Government Code. An earlier AG opinion (JM-0505) had cited cases such as Prairie Valley ISD v. Sawyer for the idea that counties could waive the requirement, but later decisions, City of Corpus Christi v. Acme Mechanical Contractors and the Texas Supreme Court in Heldenfels Bros. v. City of Corpus Christi, established that article 5160 imposed a statutory duty. The AG read the current language consistently and, quoting Morath v. Lampasas ISD that "commands are law" whether labeled mandatory or directory, concluded the county cannot disregard section 2253.021(a). It overruled JM-0505 to the extent of any conflict.

Citations and references

Government Code (McGregor Act):
- Tex. Gov't Code ch. 2253 — public work performance and payment bonds, including the bond requirement (§ 2253.021) and the liability for failing to obtain a payment bond (§ 2253.027)

Key cases:
- Dealers Elec. Supply Co. v. Scroggins Constr. Co., 292 S.W.3d 650 (Tex. 2009) — overview of the McGregor Act
- Heldenfels Bros. v. City of Corpus Christi, 832 S.W.2d 39 (Tex. 1992) — predecessor statute imposed a statutory duty
- Hartford Fire Ins. Co. v. City of Mont Belvieu, 611 F.3d 289 (5th Cir. 2010) — performance bond requirement is mandatory

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/ken-paxton/kp-0514
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2026/kp-0514.pdf

Original opinion text

February 5, 2026

The Honorable Lilli A. Hensley
Sterling County Attorney
Post Office Box 88
Sterling City, Texas 76951

Opinion No. KP-0514
Re: Performance and payment bond requirements under Government Code § 2253.021 (RQ-0588-KP)

Dear Ms. Hensley:

You ask whether a county must "require each contractor for a road and/or bridge project to carry a performance bond and/or payment bond." To this end, you explain that Sterling County contracted with "a road construction company[] . . . to construct roads in phases" and required the company "to purchase performance and payment bonds in increments coinciding with the phases of the project[,] as specified by" subsection 2253.021(a) of the Texas Government Code. Request Letter at 1. But that company became "insolvent and . . . failed to complete the project," id., prompting the County to find a different entity who will both "complete the bonded phase of the project" and "the remaining phase(s) . . . without requiring [another] performance or payment bond." Id. You thus seek guidance as to whether a county may waive the performance and payment bond requirements referenced in subsection 2253.021(a). See id. at 1–2.

Chapter 2253 of the Government Code governs performance and payment bonds when a county contracts with a prime contractor for a road or bridge public work project that meets the requisite dollar amount.

Chapter 2253 of the Government Code, "historically called the McGregor Act," governs performance and payment bonds for public work contracts. Dealers Elec. Supply Co. v. Scroggins Constr. Co., 292 S.W.3d 650, 652 (Tex. 2009); see generally TEX. GOV'T CODE §§ 2253.001–.079. Relevant here, subsection 2253.021(a) provides that a governmental entity who enters into a public work contract exceeding $100,000 "shall require the [prime] contractor" to execute a performance bond before beginning work. TEX. GOV'T CODE § 2253.021(a)(1). And for a public work contract exceeding $25,000, the subsection provides that a governmental entity "shall require the [prime] contractor" to execute a payment bond before beginning work. Id. § 2253.021(a)(2)(A).

[Footnote: The dollar amount is increased to $50,000 if the governmental entity is a municipality or joint airport board. See TEX. GOV'T CODE § 2253.021(a)(2)(B).]

The Act defines several key terms used in subsection 2253.021(a): It defines "[g]overnmental entity" to include a county, id. § 2253.001(1)(A), and a "[p]ublic work contract" to "mean[] a contract for . . . carrying out or completing any public work," id. § 2253.001(4). Though the term "public work" is not defined, Texas courts have applied it to road and bridge projects. See, e.g., Bond Restoration, Inc. v. Ready Cable, Inc., 462 S.W.3d 597, 599–600 (Tex. App.—Amarillo 2015, pet. denied) (applying the statute to a "street improvement project"); Emps. Cas. Co. v. Stewart Abstract Co., 17 S.W.2d 781, 782 (Tex. Comm'n App. 1929) (construing the predecessor statute and observing that "construction of a county road is a public work"); Trinity Portland Cement Co. v. Lion Bonding & Sur. Co., 229 S.W. 483, 484 (Tex. Comm'n App. 1921, judgm't adopted) (applying predecessor statute to contract to build bridges). Further, a "[p]rime contractor" is defined to "mean[] a person, firm, or corporation that makes a public work contract with a governmental entity." TEX. GOV'T CODE § 2253.001(3). Subsection 2253.021(a) therefore applies to a county contract with a prime contractor for a road or bridge public work project that meets the value-based threshold.

[Footnote: You do not ask, and we do not address, whether any particular "road and/or bridge project" constitutes a public work under Chapter 2253. Request Letter at 1.]

Subsection 2253.021(a) imposes a mandatory duty or obligation on a governmental entity to require a prime contractor to execute a performance and payment bond.

In relation to a public work contract, you ask whether subsection 2253.021(a) mandates that a county require the prime contractor "to purchase or carry a performance bond and/or payment bond," or whether a county may waive those requirements. Request Letter at 2. "The 'fundamental rule' for determining whether a statutory provision is mandatory or directory 'is to ascertain and give effect to the legislative intent.'" AC Ints., L.P. v. Tex. Comm'n on Env't Quality, 543 S.W.3d 703, 708 (Tex. 2018) (quoting Chisholm v. Bewley Mills, 287 S.W.2d 943, 945 (Tex. 1956)). Factors courts consider in determining that intent include "the plain meaning of the words used, as well as the entire act, its nature and object, and the consequences that would follow from each construction." Tex. Windstorm Ins. Ass'n v. Kelly, 680 S.W.3d 632, 639 (Tex. App.—Beaumont 2023, pet. denied) (quoting Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 494 (Tex. 2001)). Whether the term "shall" is mandatory often turns on whether "consequences follow a failure to comply." AC Ints., 543 S.W.3d at 709 (quoting State v. $435,000.00, 842 S.W.2d 642, 644 (Tex. 1992) (per curiam)). "When the statute is silent about consequences of noncompliance," courts "look to the statute's purpose in determining the proper consequence of noncompliance." Albertson's, Inc. v. Sinclair, 984 S.W.2d 958, 961 (Tex. 1999) (per curiam). "Generally, courts construe a statutory provision as mandatory when the power or duty to which it relates is for the public good." Id. (citing State v. City of Greenville, 726 S.W.2d 162, 169 (Tex. App.—Dallas 1986, writ ref'd n.r.e.)).

Beginning with the text, subsection 2253.021(a) provides that a governmental entity "shall require" a prime contractor to execute a performance and payment bond. TEX. GOV'T CODE § 2253.021(a). The Legislature's use of "shall" generally indicates the intent that the directive be mandatory, creating a duty or obligation. Tex. Windstorm Ins. Ass'n, 680 S.W.3d at 639; see also TEX. GOV'T CODE § 311.016(2) (providing that unless the context or statute provides otherwise, "'[s]hall' imposes a duty").

This construction finds support in the nature and object of each bond. A performance bond is "for the protection of the . . . governmental entity awarding the public work contract," TEX. GOV'T CODE § 2253.021(b)(1)—as the County's recent experience contracting with an insolvent company should make obvious—and guarantees completion of the contract, id. § 2253.021(b)(3). See also, e.g., City of Wolfe City v. Am. Safety Cas. Ins. Co., 557 S.W.3d 699, 705 (Tex. App.—Texarkana 2018, pet. denied) ("Under a performance bond, a 'surety is liable for a default in the performance by the principal of its contract obligations.'" (quoting Beard Fam. P'ship v. Com. Indem. Ins. Co., 116 S.W.3d 839, 845 (Tex. App.—Austin 2003, no pet.))). And while the Act imposes no statutory consequence for noncompliance, the fact that the performance bond requirement relates to the public good by protecting a governmental entity in the implementation of a public work contract indicates it is mandatory. See, e.g., City of Greenville, 726 S.W.2d at 169 ("A statutory provision is generally regarded as mandatory where the power or duty to which it relates is for the public benefit, good, interest or protection, for the security of public rights, or for the advancement of public justice." (emphasis added)). Indeed, courts have described the performance bond requirement as mandatory in nature. See, e.g., Hartford Fire Ins. Co. v. City of Mont Belvieu, 611 F.3d 289, 294 (5th Cir. 2010) (stating "Texas law mandates that a 'governmental entity that makes a [qualifying] public work contract with a prime contractor shall require the contractor, before beginning the work, to execute to the governmental entity[] . . . a performance bond" (quoting TEX. GOV'T CODE § 2253.021(a))).

A payment bond "'is solely for the protection and use of payment bond beneficiaries,' such as subcontractors, laborers, and materialmen." Dealers Elec. Supply Co., 292 S.W.3d at 653 (quoting TEX. GOV'T CODE § 2253.021(c)); see also TEX. GOV'T CODE § 2253.001(9) (defining "subcontractor"). It helps ensure these individuals are paid for their labor and materials because they generally do not enjoy the same lien rights on projects with governmental entities as they do on private projects. See Dealers Elec. Supply Co., 292 S.W.3d at 653. When "a governmental entity fails to obtain from a prime contractor a payment bond as required by" subsection 2253.021(a), it "is subject to the same liability that a surety would have if the surety had issued a payment bond and if the entity had obtained the bond." TEX. GOV'T CODE § 2253.027(a); see also id. § 2253.022(f). This consequence for noncompliance shows the payment bond requirement is indeed mandatory. See AC Ints., 543 S.W.3d at 709.

Finally, construing either bond requirement as directory—rather than mandatory—would thwart the stated purpose of these requirements and leave governmental entities as well as subcontractors without the protections intended by the Legislature. See TEX. GOV'T CODE § 2253.021(b)(1), (c)(1). Given these considerations, which are only magnified by the County's recent experience, subsection 2253.021(a)'s statement that a governmental entity "shall require" a performance and payment bond imposes a mandatory duty or obligation on the governmental entity. Cf. Heldenfels Bros. v. City of Corpus Christi, 832 S.W.2d 39, 42 (Tex. 1992) (construing the predecessor statute to impose "a statutory duty upon a" governmental entity).

To be sure, a prior opinion of this office observed that some courts had not given subsection 2253.021(a)'s predecessor statute, article 5160, "mandatory effect where counties ha[d] chosen to waive the [bond] requirement." Tex. Att'y Gen. Op. No. JM-0505 (1986) at 7 (citing, among other cases, Prairie Valley Indep. Sch. Dist. v. Sawyer, 665 S.W.2d 606 (Tex. App.—Fort Worth 1984, writ ref'd n.r.e.)). Article 5160 at that time provided "prime contractors on public works contracts for more than $25,000 with the state, county, or another political unit 'shall be required before commencing such work to execute . . . statutory [performance and payment] bonds.'" Id. at 1 (alteration in original) (quoting TEX. REV. CIV. STAT. art. 5160). Soon after the opinion was issued, a court construed the words "'shall be required' to mean that the contracting governmental authority bears a responsibility or duty to ensure that the prime contractor posts a sufficient payment bond before commencing work under the contract." City of Corpus Christi v. Acme Mech. Contractors, Inc., 736 S.W.2d 894, 905 (Tex. App.—Corpus Christi 1987, writ denied). The Texas Supreme Court similarly concluded that "article 5160 imposed a statutory duty upon a" governmental entity. Heldenfels Bros., 832 S.W.2d at 42. As a result, the cases discussed in Opinion JM-0505 do not reflect how article 5160 was ultimately construed. We therefore interpret the similar language here in a manner consistent with the Court's construction of article 5160.

[Footnote: The Legislature repealed article 5160 effective September 1, 1993, and adopted titles 5, 6, and 10 of the Texas Government Code. See Act of May 22, 1993, 73d Leg., R.S., ch. 268, §§ 1, 46(1), 1993 Tex. Gen. Laws 583, 583–954, 986. The statutory provisions governing public work performance and payment bonds at issue here were recodified in title 10 of the Texas Government Code. See TEX. GOV'T CODE §§ 2253.001–.079.]

[Footnote: Like Opinion JM-0505, you cite Prairie Valley Independent School District v. Sawyer, for the proposition that "a governmental entity can waive the" bond requirements. Request Letter at 1; Tex. Att'y Gen. Op. No. JM-0505 (1986) at 7. But the Texas Supreme Court's interpretation controls, and Prairie Valley does not govern the construction of article 5160. See also Tex. Att'y Gen. LO-95-006 (1995) at 3 (concluding "a public school district must obtain a payment bond on a public work contract"). We therefore overrule JM-0505 to the extent it is inconsistent with this Opinion.]

"[W]hether . . . categorized as . . . mandatory[] or merely directory," the Texas Supreme Court recently made clear, legal "commands are law." Morath v. Lampasas Indep. Sch. Dist., 686 S.W.3d 725, 744 (Tex. 2024). Accordingly, the County is not free to disregard the statutory command of subsection 2253.021(a).

S U M M A R Y

Subsection 2253.021(a) of the Government Code obligates a county to require a prime contractor to execute a performance and payment bond.

Very truly yours,

KEN PAXTON
Attorney General of Texas

BRENT WEBSTER, First Assistant Attorney General
LESLEY FRENCH, Chief of Staff
D. FORREST BRUMBAUGH, Deputy Attorney General for Legal Counsel
JOSHUA C. FIVESON, Chair, Opinion Committee
CHRISTY DRAKE-ADAMS, Assistant Attorney General, Opinion Committee