A new bill was recently introduced and ultimately passed in the State of Utah. HB 508 was signed by the Governor on March 26, 2026, and could have lasting impacts on the Utah construction market. The bill addresses the Utah Division of Facilities Construction Management’s (DFCM) current procedures—most notably, its requirement to furnish performance and payment bonds from all contractors it hires directly. The bill now leaves it up to the DFCM’s discretion on whether to bond the contractor or not.
This was introduced as a cost-saving measure for the State. The DFCM’s 2025 budget was nearly $250 million for construction. At an average 1% bond rate, that is nearly $2.5 million a year the state will be saving in bond premiums.
For those who don’t know, most federal and local governments require performance and payment bonds from contractors on construction projects over $150,000. The bonds provide the state and contractors protection in two ways:

Performance Bonds guarantee completion of the project to the Obligee—in this case, the DFCM.
Payment Bonds guarantee payment to all subcontractors and suppliers working for the principal (in this case, the General Contractor).

The removal of this requirement opens the state up to massive exposures. If a project is not bonded, the state is essentially self-insuring against contractor default. The state is also removing any subcontractor’s payment rights on state projects by removing the payment bond.
Subcontractors currently cannot file a lien on public property, hence the need for a payment bond. This could lead to increased construction costs as subcontractors price in the potential payment risk associated with the lack of a payment bond.
The legislation does not remove the bond requirement altogether, so the DFCM can still require bonds on its projects. However, it does open the door for the DFCM to waive bond requirements where it sees fit.
All contractors looking to work for the DFCM in the future should be diligent in their own internal underwriting and assess whether a bond is required. Previously, contractors could confidently assume this on state projects.
For subcontractors doing private work, it is always good practice to ask their General Contractors if they are required to provide a bond. The difference between yes and no could determine whether or not they get paid.
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This is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.