Rethinking Performance Bonds in Correctional Health Care Services
Citation: Spark Training. (2025). Rethinking Performance Bonds in Correctional Health Care Services. https://doi.org/10.5281/zenodo.17612179
Abstract
Contracting for health care within a jail is complex. Some requests for proposals (RFPs) require performance bonds to bid on a contract. Requiring performance bonds in jail health care contracts adds costs for counties while offering little benefit. This paper explains why performance bonds can be a barrier to quality correctional health services and outlines more effective alternatives for ensuring contract compliance.
What Are Performance Bonds?
A facility may ask a company to place money into a performance bond to ensure that it will complete its work as agreed. If the company does not follow through, the bond will be given back to the county. The money is tied up for the life of the contract and cannot be used by the company for other purposes.
Bonds are generally used for projects like construction because contractors often receive large sums of money from the client upfront to buy materials or hire workers. If the contractor abandons the work, the client could lose that money. A bond protects the client by allowing it to recover the lost funds.
The Problem with Health Care Performance Bonds
Applying performance bonds to health care creates an inconsistent and inappropriate standard. Bonds give the county sole authority to decide whether a company met contract standards, which can allow for bond claims despite overall contract fulfillment.
Health care contracts work differently than large public projects. Companies providing jail health care generally bill monthly for the services they provide. The county only pays for work after it is delivered, so there is no large upfront payment that could be lost. Unexpected expenses such as off-site medical care are covered by the inmate’s insurance, a rolling monthly pool, or paid directly by the county depending on the individual contract. Even in a multimillion-dollar contract, the county’s financial investment at any one time is relatively small.
The problem of large upfront financial losses that performance bonds aim to solve does not exist for health care or other similar services. This is why performance bonds are not standard in professional service contracts. County attorneys, for example, are not asked to secure bonds. Instead, a county can simply terminate the contract and stop paying for the service if it is not satisfactory.
Bonds tie up money that could otherwise support program improvements, technology, or emergency staffing needs. This restriction can make it harder for a company to be flexible and responsive to patient needs. In addition to the cost of the bond, bonding companies generally charge a fee for their services. A 10% bond fee on a $5 million bond could mean an additional $500,000 is added to the total cost of the contract.
Alternatives for Accountability
Continuous quality improvement (CQI) processes, generally a standard in correctional health care, provide accountability and oversight. Regular meetings and compliance checks ensure issues are identified and corrected proactively. Unlike bonds, which only recoup money spent and do not address problems as they occur, CQIs allow counties to monitor and correct issues in real time. Checklists, staff training programs, and standardized care processes improve performance and ensure accountability within the terms of the contract.
Most contracts also include termination clauses, generally with 30-day notices. This protects counties more effectively than bonds. Instead of paying out for inadequate services and recouping that money from a bond, a county can simply terminate a contract and stop paying. This approach allows the county to safeguard its financial investment immediately if performance is not acceptable.
Conclusion
Performance and payment bonds are designed for projects with high upfront costs, like construction. They are counterproductive when misapplied to professional services like correctional health care. Counties bear the indirect costs of bonds through higher contract prices while gaining little additional protection. A better approach is to strengthen oversight through CQI processes and termination clauses. Counties and jails should remove performance bond requirements from correctional health care contracts and instead rely on proven oversight mechanisms that support both budgets and patient care.