What type of bond is triggered by the default of a contractor?

A performance bond is a surety bond that provides security to the project owner by ensuring the completion of the construction project according to the terms of the contract. When a contractor defaults, meaning they fail to fulfill their obligations under the contract, the performance bond can be triggered. This bond protects the owner against financial loss and guarantees that the project will be completed, either by the original contractor or by hiring another contractor to finish the work.

The performance bond is crucial in design-build projects, as it ensures that the design-builder is held accountable for delivering the project on time and within budget. If the contractor defaults, the surety company that issued the bond steps in to either complete the work or compensate the owner for any resulting losses, providing a safeguard against potential disruptions in the project timeline and financial constraints.

In contrast, other types of bonds mentioned, such as payment bonds, relate to ensuring that subcontractors and suppliers are paid rather than addressing the contractor's overall performance, while builder's risk bonds cover losses related to property damage during construction. Thus, the performance bond is specifically designed to address defaults related to project completion, making it the correct answer.