# Caltrans Construction Contracts: Bonds, Insurance and Guarantee Terms

URL: https://mycontractorsinsurancequote.com/construction-surety-bonds/public-agency-contractor-requirements/caltrans
Updated: 2026-10-29 · Reviewed by the Principal, Gleason Insurance Brokers, LLC
Publisher: My Contractors Insurance Quote, a website of Gleason Insurance Brokers, LLC

Under section 3-1.05 of Caltrans' 2026 Standard Specifications, the successful bidder furnishes a payment bond of at least 100 percent and a performance bond of at least 50 percent of the total bid, after bidding with security of at least 10 percent under section 2-1.34. Section 7-1.06 then sets general liability, umbrella, auto and employer's liability minimums that rise with the size of the bid, names the State as an additional insured on a primary basis and calls for carriers rated A- or better with a Financial Size Category of VII or better. The contract bonds stay in force through the one-year guarantee period, and each contract's special provisions can change any of these terms, so confirm the current requirement with Caltrans for the contract being bid.

## Key Decision Points
- Bid security of at least 10 percent of the bid: cash, a cashier's or certified check or a bidder's bond from an admitted surety insurer (section 2-1.34).
- Contract bonds: a payment bond of at least 100 percent and a performance bond of at least 50 percent of the total bid (section 3-1.05).
- Liability minimums scale with the total bid, reaching $2 million each occurrence, a $4 million general aggregate and a $25 million umbrella or excess limit above $25 million (section 7-1.06D(2)).
- The contractor guarantees the work for one year after acceptance, and the contract bonds stay in force until the guarantee period ends or corrective work is complete, whichever is later (section 5-1.47).
- Caltrans does not retain money from progress payments (section 9-1.16F), though separate withholds can apply.

## Before the Bid: DIR Registration and Contractor License

Caltrans' Standard Specifications, 2026 Edition, set the general terms for state highway construction contracts, and Caltrans set October 19, 2026, as the date it implements the 2026 Standards. The 2025 Standards remain posted for contracts written under them, so the edition named in the bid documents controls. Each contract adds special provisions that can revise any section discussed on this page.

Section 2-1.03 bars listing a contractor or subcontractor on a bid proposal for a public works project unless it is registered with the Department of Industrial Relations under Labor Code section 1725.5, with limited bid-purpose exceptions. Section 3-1.03 applies the same registration rule at award. License timing depends on funding. On a non-federal-aid contract, section 3-1.06 requires the contractor to be properly licensed from bid opening through contract acceptance (Bus & Prof Code section 7028.15), and joint venture bidders need a joint venture license before award. On a federal-aid contract, the license requirement runs from award through acceptance (Pub Cont Code section 10164).

Encroachment permits for work in the state highway right of way are a separate process, explained in [California encroachment permit bonds](https://mycontractorsinsurancequote.com/construction-surety-bonds/encroachment-permit-bonds/california).

## Bid Security, Award Timing and Contract Execution

Section 2-1.34 requires bidder's security equal to at least 10 percent of the bid in one of five forms: cash, a cashier's check, a certified check, a signed bidder's bond by an admitted surety insurer or an electronic bidder's bond by an admitted surety insurer submitted through an electronic registry service the Department approves. Cash, checks and paper bonds go to the Office Engineer before bid opening, and an electronic bond is submitted with the electronic bid. The Bid book contains a bond form, and a bidder using a different form must include the same information.

Under section 3-1.04, an award goes to the lowest responsible bidder within 30 days after bid opening when the estimated cost on the Notice to Bidders is under $200 million and within 60 days at $200 million or more, and the award period can be extended if the bidder agrees. Section 3-1.18 then requires the signed contract, the contract bonds, the insurance documents and the small business participation report to reach the Office Engineer before the 10th business day after the bidder receives the contract. Missing that window can put the bid security at risk, so bond and insurance documents are typically lined up with the surety and carriers before bid day rather than after award.

For how sureties underwrite bid security, see [bid bonds for public contracts](https://mycontractorsinsurancequote.com/construction-surety-bonds/bid-bonds).

### Illustrative scenario: A Paving Contractor Bids a $14 Million Caltrans Rehabilitation Job

Harlan Ridge Paving, a California asphalt and concrete contractor, plans to bid a $14 million pavement rehabilitation contract advertised under the 2026 Standard Specifications. Its program carries $1 million each occurrence, a $2 million general aggregate and a $10 million umbrella. Because the bid falls in the over $10 million to $25 million band, section 7-1.06D(2) calls for $2 million each occurrence, a $4 million general aggregate applying to the contract and a $15 million umbrella, so the firm's broker works with its carriers on higher limits and an additional insured endorsement at least as broad as CG 2010 and CG 2037 before bid day. Its surety considers a 10 percent bid bond, then a $14 million payment bond and a $7 million performance bond that would stay in force through the one-year guarantee. The details are hypothetical, and a real program depends on the agency, the surety and carriers and the firm's own risk.

## Contract Bonds Under Section 3-1.05

Section 3-1.05, which cites Public Contract Code sections 10221 and 10222, requires the successful bidder to furnish two bonds. The payment bond secures the claim payments of laborers, workers, mechanics or materialmen providing goods, labor or services under the contract, and the specification says it "must be equal to at least 100 percent of the total bid." The performance bond secures faithful performance of the contract, and it "must be equal to at least 50 percent of the total bid." The Department provides the bond forms to the successful bidder.

For the surety, the payment bond carries a penalty equal to the full total bid while the performance bond carries half of it. Both run longer than the construction period, because section 5-1.47 keeps the contract bonds in force through the one-year guarantee discussed below. A surety typically looks at the contractor's work program, financial statements and the specific job before setting terms, and capacity for a Caltrans contract is subject to the surety's underwriting and the terms of the bonds issued.

Statutory payment bond claims and deadlines on California public works are explained in [California public works bond requirements](https://mycontractorsinsurancequote.com/construction-surety-bonds/public-works-bond-requirements/california).

## Insurance Under Section 7-1.06: Limits by Total Bid

Section 7-1.06B requires insurance on all operations with companies acceptable to the State, kept in full force from the start of work through contract acceptance, and all insurance must be with a company rated by A.M. Best at a Financial Strength Rating of A- or better and a Financial Size Category of VII or better. Completed operations coverage must be maintained through the expiration of the patent deficiency statute of repose in Code of Civil Procedure section 337.1, so that obligation extends beyond acceptance.

Section 7-1.06D(2) sets general liability and umbrella or excess minimums by total bid. The general aggregate must apply separately to the contractor's work under the contract. If primary limits are impaired or exhausted, the umbrella or excess policy must drop down; its limits are separate from and in addition to the general liability limits, and it may not carry exclusions barring follow-form coverage for the required coverages.

Employer's liability under section 7-1.06C must be at least $1,000,000 for each accident, $1,000,000 policy limit for disease and $1,000,000 for each employee for disease, with a waiver of subrogation in favor of the State, and Longshore and Harbor Workers' or Jones Act coverage must be included where that exposure exists. Workers' compensation itself is secured under Labor Code section 3700, and signing the contract constitutes the section 1861 certification. Auto liability under section 7-1.06E is at least $1,000,000 combined single limit for each accident for owned, hired and non-owned autos. Auto must also be scheduled on the umbrella or excess policy.

- Total bid of $1 million or less: $1 million each occurrence, $2 million products and completed operations aggregate, $2 million general aggregate and $5 million umbrella or excess
- Over $1 million to $10 million: $1 million each occurrence, $2 million products and completed operations aggregate, $2 million general aggregate and $10 million umbrella or excess
- Over $10 million to $25 million: $2 million each occurrence, $2 million products and completed operations aggregate, $4 million general aggregate and $15 million umbrella or excess
- Over $25 million: $2 million each occurrence, $2 million products and completed operations aggregate, $4 million general aggregate and $25 million umbrella or excess

For how a general aggregate is written to apply to a single contract, see [per-project aggregate endorsements](https://mycontractorsinsurancequote.com/project-specific-liability-insurance/per-project-aggregate).

## Additional Insured, Primary Wording and Policy Exclusions

The State, including its officers, directors, agents (excluding agents who are design professionals) and employees, must be named as additional insureds on the general liability and umbrella policies for liability arising out of work performed by or for the contractor under the contract. That coverage must be at least as broad as ISO additional insured endorsements CG 2010 and CG 2037 for completed operations, or an equivalent the Department approves. The specification limits it as well: it does not extend to pre-existing roadway defects the work did not change, to claims after acceptance unless they relate to acts during the work, or to the extent prohibited by Insurance Code section 11580.04.

The policy must state that the insurance for the additional insureds is primary and that any insurance or self-insurance the State maintains is excess only and not called on to contribute, and it must include a waiver of subrogation and separation of insureds. Section 7-1.06D(1) requires coverage extending to premises, operations and mobile equipment, personal and advertising injury, products and completed operations and contractual liability. It bars a cross-suits exclusion for suits between Caltrans and another insured and an exclusion for explosion, collapse and underground hazards. The policies must also reinstate limits annually during construction.

At execution, section 3-1.07 calls for copies of the general liability and excess policies or a binder, including declarations and endorsements, with standard ISO CG 00 01 or similar exclusions allowed and additional exclusions at the Department's discretion. Certificates must show deductibles, endorsed exclusions and 10 days' prior written notice of cancellation, lapse or reduction. A self-insured retention over $50,000 needs a CPA declaration that the bidder has the funds to cover it, deductibles are allowed when the State does not consider them excessive (section 7-1.06G), and self-insurance is subject to separate annual State approval (section 7-1.06I). Whether a given claim triggers these policies depends on their wording and the facts.

For the licensing and insurance picture California civil contractors carry across agencies, see [California civil and infrastructure contractors](https://mycontractorsinsurancequote.com/california/audiences/civil-infrastructure-contractors).

## Indemnity and Subcontractor Terms

Section 7-1.05A requires the contractor to defend, indemnify and save harmless the State, its officers, employees and agents (excluding agents who are design professionals) from claims for bodily injury and property damage arising out of the contractor's performance, and except as otherwise provided by law it applies "regardless of the existence or degree of fault of the State." Claims from conduct described in Civil Code section 2782 and from pre-existing highway conditions the work did not change are excluded. The contractor must respond to a tender of defense within 30 days or the Department may withhold funds, and the obligation reaches claims after acceptance that relate to acts during the work. Section 7-1.05B extends the same protection to the county, city or district where the work is performed.

Under section 5-1.13A, each subcontract must comply with the contract, no subcontract relieves the prime of its responsibilities, and the prime must perform work equal to at least 30 percent of the original total bid with its own forces, except on non-federal-aid building construction contracts. The specifications do not set a general rule that subcontractors carry the prime's limits. They do say not to require a small business subcontractor to carry liability limits above the section 7-1.06D(2) table, reading total bid as the subcontract amount. Because the prime owes the State's indemnity either way, its contractual liability coverage and the indemnity it asks of each subcontractor are typically read together.

For the program a public works prime typically carries, see [public works contractor insurance and bonds](https://mycontractorsinsurancequote.com/who-we-serve/general-contractors/public-works-contractors).

## Guarantee, Retention, Railroad and Builder's Risk

Section 5-1.47 requires the contractor to guarantee the work against substantial defects for one year after contract acceptance, or one year after the relief date for parts it was relieved of maintaining, excluding damage from events outside its control such as normal wear and tear or acts of God. The Department does not pay for corrective work, the same insurance required before acceptance applies during corrective work, and the contract bonds must remain in force until the later of the end of the guarantee period or completion of the corrective work. A contract warranty specification that conflicts with section 5-1.47 governs instead.

Under section 9-1.16F, the Department does not retain money from progress payments for work performed. Withholds under section 9-1.16E are separate, including a 10 percent withhold for noncompliant progress, performance-failure withholds capped at 10 percent of the total bid and stop-notice withholds, so cash on a Caltrans job can still be held for cause.

Railroad insurance is set contract by contract. Section 5-1.20C states that when a contract includes an agreement with a railroad company, its provisions appear in the Information Handout document titled "Railroad Relations and Insurance Requirements," and the contractor complies with that document, so any railroad protective liability requirement is read from that contract's documents. The Standard Specifications do not contain a builder's risk requirement; any property insurance for work in progress comes from the contract's special provisions or the contractor's own risk decisions.

For the bond that stays open through the guarantee period, see [performance bonds](https://mycontractorsinsurancequote.com/construction-surety-bonds/performance-bonds).

## Program Volume: The 2026 SHOPP

Caltrans' 2026 State Highway Operation and Protection Program, adopted in March 2026, states that Caltrans will implement $17.9 billion in projects and reserves over four years, covering fiscal years 2026-27 through 2029-30. The SHOPP Minor Program within that total provides $1 billion for relatively low-cost capital projects of less than $1.25 million.

For contractors, that volume of rehabilitation and operational work means repeated bids under the same Standard Specifications. A bonding line and insurance program built to these terms can typically be used from one award to the next, subject to the surety's and carriers' underwriting of each contract and to any special provisions that change the requirements.

For how other state DOTs and special districts set contractor requirements, see [public agency contractor requirements](https://mycontractorsinsurancequote.com/construction-surety-bonds/public-agency-contractor-requirements).

## Before You Ask for a Quote

### What to Gather
- The Notice to Bidders, the Standard Specifications edition and the contract's special provisions
- DIR registration numbers for the firm and each listed subcontractor
- Current general liability and excess policies with declarations, endorsements and any binder
- Additional insured, primary and waiver of subrogation endorsements for each policy
- Each carrier's A.M. Best rating and Financial Size Category
- Work-in-progress schedule and financial statements for the surety
- The Information Handout, including any railroad insurance document

### What to Ask the Insurer or Surety
- Which total bid band in section 7-1.06D(2) applies, and do our umbrella limits meet it?
- Does any policy carry a cross-suits exclusion or an explosion, collapse and underground exclusion?
- Is our general aggregate written to apply separately to this contract?
- Does our self-insured retention exceed $50,000, so a CPA declaration is needed?
- Can the surety support a 100 percent payment bond kept open through the one-year guarantee?
- Do the special provisions add railroad, builder's risk or warranty terms?

## Broker Notes

**Quick Answer:** Caltrans' 2026 Standard Specifications call for bid security of at least 10 percent, a payment bond of at least 100 percent and a performance bond of at least 50 percent of the total bid, plus liability limits that rise with the bid, from a $5 million to a $25 million umbrella.

**Common Mistake:** Assuming the contract bonds end at acceptance. Section 5-1.47 keeps them in force until the one-year guarantee period ends or corrective work is complete, whichever is later.

**Broker Perspective:** The insurance documents are due with the signed contract before the 10th business day after the bidder receives it, so an endorsement gap found after award can put the bid security at risk.

**Coverage Impact:** A cross-suits exclusion or an explosion, collapse and underground exclusion conflicts with section 7-1.06D(1), and whether a policy responds to a highway claim depends on its endorsements, the facts and the terms of the policy issued.

## Questions Buyers Ask

### How much bid security does Caltrans require, and can it be an electronic bond?

Section 2-1.34 requires security equal to at least 10 percent of the bid. A bidder's bond must come from an admitted surety insurer, and an electronic bidder's bond is accepted when submitted through an electronic registry service the Department approves. Cash, a cashier's check or a certified check also qualify and go to the Office Engineer before bid opening.

### Why is the Caltrans payment bond larger than the performance bond?

Section 3-1.05 sets the payment bond at no less than 100 percent of the total bid and the performance bond at no less than 50 percent, and it states the amounts without explaining the difference. For the surety, both bonds count in the contractor's program, and both stay in force through the one-year guarantee under section 5-1.47.

### What umbrella limit does Caltrans require on a $30 million highway contract?

For a total bid over $25 million, section 7-1.06D(2) calls for $2 million each occurrence, $2 million products and completed operations aggregate, a $4 million general aggregate applying to the contract and a $25 million umbrella or excess limit that drops down and follows form. Special provisions can change these, so confirm the current requirement with Caltrans for the contract.

### Does Caltrans hold retention on progress payments?

No. Section 9-1.16F states the Department does not retain money from progress payments for work performed. Separate withholds under section 9-1.16E can apply, such as withholds for noncompliant progress or performance failures, and the Department may withhold funds if a tender of defense is not answered within 30 days.

### Do Caltrans subcontractors have to carry the prime's insurance limits?

The Standard Specifications do not set a general requirement for that. They say a small business subcontractor should not be required to carry liability limits above the section 7-1.06D(2) table, measured by the subcontract amount, and every subcontract must comply with the contract. Primes typically set their own subcontract insurance terms within those bounds.

### Is builder's risk insurance required on Caltrans contracts?

The 2026 Standard Specifications do not contain a builder's risk requirement. A contract's special provisions can add property or other insurance terms, and railroad insurance comes from the Railroad Relations and Insurance Requirements document when the contract includes a railroad agreement, so read each contract's documents.

## Official Sources

1. [Caltrans Standard Specifications, 2026 Edition (sections 2-1.03, 2-1.34, 3-1.03 to 3-1.07, 3-1.18, 5-1.13A, 5-1.20C, 5-1.47, 7-1.05, 7-1.06, 9-1.16E and 9-1.16F)](https://dot.ca.gov/-/media/dot-media/programs/design/documents/2026_stdspecs---dor.pdf), California Department of Transportation. DIR registration and license timing; 10 percent bid security and admitted surety; award periods; 100 percent payment and 50 percent performance bonds (3-1.05); contract execution deadline; insurance documents and $50,000 SIR declaration; A- / VII carrier rating; completed operations through CCP 337.1; employer's liability, auto and liability limits table; additional insured, primary, waiver and separation of insureds; exclusions barred; indemnity; 30 percent self-performance and small business subcontractor limit; railroad document; one-year guarantee with bonds in force; no retention and separate withholds Verified 2026-10-26.
2. [2026 Standard Plans and Standard Specifications](https://dot.ca.gov/programs/design/2026-ccs-standard-plans-and-standard-specifications), California Department of Transportation. Publication of the 2026 Standard Specifications Verified 2026-10-26.
3. [Standard Plans and Standard Specifications (implementation notice)](https://dot.ca.gov/programs/design/ccs-standard-plans-and-standard-specifications), California Department of Transportation. 2026 Standards implemented on October 19, 2026; 2025 Standards still posted Verified 2026-10-26.
4. [2026 SHOPP (State Highway Operation and Protection Program)](https://dot.ca.gov/-/media/dot-media/programs/financial-programming/documents/shopp/2026-shopp/2026-shopp-combined-a11y.pdf), California Department of Transportation. $17.9 billion in projects and reserves over fiscal years 2026-27 through 2029-30; $1 billion Minor Program for projects under $1.25 million; PDF cover dated March 23, 2026 Verified 2026-10-26.
5. [SHOPP and SHOPP Minor Program](https://dot.ca.gov/programs/financial-programming/state-highway-operation-protection-program-shopp-minor-program-shopp), California Department of Transportation. 2026 SHOPP listed as adopted by the CTC on March 20, 2026 (the PDF cover is dated March 23, 2026) Verified 2026-10-26.

## Related Decisions

- [railroad protective liability on Caltrans contracts](https://mycontractorsinsurancequote.com/project-specific-liability-insurance/railroad-protective-liability)
- [public agency contractor requirements](https://mycontractorsinsurancequote.com/construction-surety-bonds/public-agency-contractor-requirements)
- [California public works bonds](https://mycontractorsinsurancequote.com/construction-surety-bonds/public-works-bond-requirements/california)
- [Caltrans and city encroachment permit bonds](https://mycontractorsinsurancequote.com/construction-surety-bonds/encroachment-permit-bonds/california)
- [payment bonds](https://mycontractorsinsurancequote.com/construction-surety-bonds/payment-bonds)
- [paving contractor insurance and bonds](https://mycontractorsinsurancequote.com/who-we-serve/civil-underground-utilities/paving-contractors)

---

Start a quote request: https://mycontractorsinsurancequote.com/get-a-quote · Call 844-978-7283

Contract and insurance reviews are a courtesy service that may be available at times, depending on our workload and on the size, timing and complexity of the project. A review is not guaranteed and is limited to insurance considerations. It is not legal advice and is not a substitute for advice from your own legal counsel, which you may need before signing a contract or obtaining coverage.

Insurance and surety services are provided through Gleason Insurance Brokers, LLC. Site information is educational and does not constitute legal advice, a binder, an offer of coverage, a guarantee of eligibility or confirmation of policy terms. Insurance conditions are governed by actual issued policies; surety rights and obligations are governed by bond and indemnity documents.