Certified Professional Public Buyer (CPPB) Practice Test

What is a primary function of a payment bond?

1. Protects the contractor's rights

2. Guarantees payment to subcontractors

3. Reduces overhead costs

4. Ensures compliance with safety regulations

The correct answer is: Guarantees payment to subcontractors

The primary function of a payment bond is to guarantee payment to subcontractors and suppliers involved in a construction project. This bond serves as a financial assurance that the contractor will fulfill their payment obligations to these parties. It is particularly important in construction projects where subcontractors often contribute significantly to the work but may have limited recourse if the contractor fails to pay them. By having a payment bond in place, subcontractors and suppliers can have peace of mind knowing that they will receive payment for their services and materials, which helps to promote financial stability within the project and the wider construction industry. The other options revolve around different aspects of contract management or compliance but do not directly align with the primary purpose of a payment bond. For example, protecting the contractor's rights is more related to performance bonds or general contract law. Reducing overhead costs pertains to budgeting and financial management strategies within a project. Ensuring compliance with safety regulations is relevant to workplace safety standards but is not a function of a payment bond. Hence, guaranteeing payment to subcontractors is unequivocally recognized as the main purpose of a payment bond.