Introduction & Overview
What is a Department of Defense (DoD) Performance Bond?
A Department of Defense Performance Bond, also known as an SDDC bond or USTRANSCOM Performance Bond, is a surety bond required by the Military Surface Deployment and Distribution Command (SDDC) for all Transportation Service Providers (TSPs) who wish to transport military freight for the U.S. Department of Defense.
This bond serves as a financial guarantee that the freight carrier, broker, forwarder, or logistics company will fulfill their contractual obligations to deliver DoD freight as agreed. If a carrier fails to perform—whether through default, bankruptcy, or abandonment of shipments—the SDDC can file a claim against the bond to recover financial damages.
📋 Key Information
Bond Type: Commercial Surety Bond (Performance Bond)
Obligee: Military Surface Deployment and Distribution Command (SDDC)
Bond Amounts: $25,000 to $100,000 depending on operation size
Term: 1 year (annually renewable)
Filing: Electronic submission by surety company
What are Military Freight Performance bonds?
Military Freight Bonds (SDDC Bonds), also known as a “department of defense performance bond”, is an assurance that if the contractor fails to meet certain criteria in their contract then they will be liable for paying back any funds given out as part of the contract. This money would come from whatever was paid on behalf of the contractor in addition to compensating for any damages caused by their failure.
A Department of Defense performance bond is a type of guarantee that the United States government requires for payment in advance from contractors. Performance bonds are required for all contracts with the federal government, and they are usually used to provide an assurance that work will be completed as agreed upon. The goal of this requirement is to ensure that taxpayers’ money isn’t wasted on projects that go unfinished or do not meet specifications. DoD performance bonds protect against issues such as carrier defaults and bankruptcies while outlining the application process and benefits of being bonded for those involved in transporting military cargo.
Military Surface Deployment and Distribution Command Freight Carrier Bond
The Department of Defense performance bond (SDDC Bond) guarantees that the company will fulfill all requirements for their contract. Surety bonds provide assurance for contract fulfillment, specifically in relation to DoD performance bonds required for military freight carriers. If they do not, then they will be liable for paying back any funds given out as part of the contract. This money would come from whatever was paid on behalf of the contractor in addition to compensating for any damages caused by their failure.
Purpose, Coverage & Function
What Does a DoD Performance Bond Guarantee?
The DoD performance bond guarantees that you will successfully carry out your obligations under the freight broker guidelines. In the case of abandoned shipments, bankruptcy, or other issue, the military can contact the surety and have the surety find another freight hauler to move the equipment. Please note that the bond does not protect you for late pickup, damaged cargo, or delivery problems. You’d need to contact your insurance carrier for that.
What Does the Bond Cover?
The DoD Performance Bond provides financial protection in specific situations:
✅ COVERED by the Bond:
- Carrier default on contracted shipments
- Abandoned shipments
- Carrier bankruptcy while freight is in transit
- Failure to deliver DoD freight as contracted
- Situations requiring replacement carrier at DoD expense
❌ NOT COVERED by the Bond:
- Late pickup or delivery
- Excessive transit times
- Refusals or no-shows
- Improper or inadequate equipment
- Payment disputes with subcontractors
- Claims for lost or damaged cargo
Note: Cargo damage and loss are covered by cargo insurance, not the performance bond.
How Do DoD Performance Bonds Work?
Like all surety bonds, DoD Performance Bonds involve a three-party agreement:
1️⃣ The Principal
The Transportation Service Provider (carrier, broker, forwarder, or logistics company) who is required to obtain the bond and will be transporting DoD freight.
2️⃣ The Obligee
The Military Surface Deployment and Distribution Command (SDDC), which is the government agency requiring the bond to protect taxpayer interests.
3️⃣ The Surety
The insurance/surety company that underwrites and issues the bond, guaranteeing the principal’s performance and paying valid claims.
Eligibility & Requirements
Who Needs a DoD Performance Bond?
Any Transportation Service Provider (TSP) seeking to transport DoD freight must obtain an SDDC bond. This includes:
- Freight Carriers – Companies that physically transport military cargo
- Freight Brokers – Intermediaries who arrange transportation of DoD freight
- Logistics Companies – Third-party logistics providers handling DoD shipments
- Freight Forwarders – Both surface and air freight forwarders
⚠️ Exemptions
The following carrier types are exempt from the DoD Performance Bond requirement:
- Local drayage carriers
- Commercial zone carriers
- Barge carriers
- Rail carriers
- Sealift carriers
- Pipeline carriers
Requirements and Eligibility
DoD Performance Bond Amounts Required
The required bond amount varies based on the type of TSP, company size, and the number of states you plan to service. Here’s the complete breakdown:
For Freight Carriers – Large Companies
| Number of States Served | Required Bond Amount | Cost at 1% Rate | Cost at 3% Rate |
|---|---|---|---|
| One (1) state only | $25,000 | $250/year | $750/year |
| Two (2) to Three (3) states | $50,000 | $500/year | $1,500/year |
| Four (4) or more states | $100,000 | $1,000/year | $3,000/year |
For SBA-Registered Carriers (Small Business)
Carriers registered with the Small Business Administration (SBA) have different thresholds:
| Number of States Served | Required Bond Amount | Cost at 1% Rate | Cost at 3% Rate |
|---|---|---|---|
| Up to Three (3) states | $25,000 | $250/year | $750/year |
| Up to Ten (10) states | $50,000 | $500/year | $1,500/year |
| Eleven (11) or more states | $100,000 | $1,000/year | $3,000/year |
Special Categories
Freight Brokers, Forwarders & Logistics Companies
Required Amount: $100,000
This higher amount is required due to the volume of traffic handled by these modes.
Cost Range: $1,000 – $3,000/year (good credit) or $4,000 – $10,000/year (challenged credit)
Bulk Fuel Carriers
Required Amount: $25,000
Bulk fuel carriers have a reduced bonding requirement regardless of states served.
Cost Range: $250 – $750/year (good credit) or $1,000 – $2,500/year (challenged credit)
Experienced Carriers (3+ Years with DoD)
📊 Revenue-Based Bond Option
Carriers who have conducted business with the DoD for three or more consecutive years may qualify for a revenue-based bond amount:
- Bond Amount: 2.5% of total DoD revenue for the previous 12 months
- Minimum: Cannot be less than $25,000
- Maximum: Cannot exceed $100,000
Example: If your DoD revenue for the past year was $1,000,000, your bond would be $25,000 (2.5% of $1M). If revenue was $5,000,000, your bond would be capped at the $100,000 maximum.
⚠️ Important Note About Service Areas
Your bond amount is based on the number of states where shipments will begin AND end. For example, if you’re hauling from California to Nevada, that counts as serving two states. All movements must begin and end within your selected service states.
Complete SDDC Registration Requirements
Obtaining a DoD Performance Bond is just one step in becoming an SDDC-registered freight carrier. Here’s the complete process to become eligible to haul military freight:
Apply for a Standard Carrier Alpha Code (SCAC)
The SCAC is a unique 2-4 letter code that identifies your transportation company. It’s issued by the National Motor Freight Traffic Association (NMFTA).
- How to Apply: Visit NMFTA.org to apply online or by mail
- Cost: $68 online or $78 by mail (2024 pricing)
- Processing Time: Typically 1-3 business days
- Important: You need a separate SCAC for each business entity. Each SCAC requires its own bond.
Establish Electronic Payment Account
Set up an account with U.S. Bank to receive electronic payments for your services.
- Provider: U.S. Bank Syncada (formerly PowerTrack)
- How to Apply: Visit the U.S. Bank Syncada portal
- Cost: Free registration
- Purpose: Enables electronic billing and payment for DoD freight services
Obtain or Verify DOT Authority
Maintain a valid U.S. Department of Transportation (DOT) operating authority.
- Requirement: Must have had continuous DOT authority for at least 3 years
- For Motor Carriers: MC number from FMCSA
- For Freight Forwarders: FF number from FMCSA
- Verification: SDDC will verify your authority and operating history
Complete CBA License Application
If applicable, complete the Commercial Bill of Lading Application.
- Who Needs This: Surface freight forwarders and brokers
- Purpose: Authorizes handling of commercial bills of lading
Purchase DoD Performance Bond
Obtain your SDDC Performance Bond from an authorized surety company.
- Bond Amount: Based on your carrier type and service area (see bond amounts section above)
- Filing: Surety company files electronically with SDDC
- Processing: Typically 1-2 business days
- Term: 1 year, must be renewed annually
Obtain Cargo Insurance
Secure appropriate cargo insurance coverage.
- Standard Requirement: $150,000 cargo insurance coverage
- Bulk Fuel Carriers: $25,000 minimum coverage
- Provider: Through your commercial insurance carrier
- Important: Cargo insurance covers damage/loss; the performance bond does not
HAZMAT Certification (If Applicable)
If transporting hazardous materials, obtain HAZMAT certification.
- Agency: Pipeline and Hazardous Materials Safety Administration (PHMSA)
- Website: PHMSA.dot.gov
- Only Required If: You plan to transport hazardous materials for the DoD
Section 889 Compliance Verification
Confirm compliance with FY2019 National Defense Authorization Act Section 889(a)(1)(B).
- Requirement: Cannot use prohibited telecommunications or video surveillance equipment
- Covered Entities: Huawei, ZTE, Hytera, Hikvision, Dahua
- Verification: Self-certification during registration
Submit SDDC Registration
Complete and submit your SDDC Freight Carrier Registration Package.
- Where to Apply: SDDC online registration portal
- Documents Needed: All certifications, proof of bond, insurance certificates
- Processing Time: SDDC will review and respond within 3 business days
- Approval: Upon approval, you’ll receive your ETA password for accessing DoD systems
⚠️ Trust Funds & Alternatives NOT Accepted
The SDDC will not accept the following in lieu of a performance bond:
- Trust funds
- Customs bonds
- DOT bonds (freight broker bonds)
- Letters of credit
- Cash deposits
A surety bond from an authorized company is the only acceptable form of financial guarantee.
Cost & Risk Considerations
How Much Does a DoD Performance Bond Cost?
The cost of your DoD Performance Bond is called the “premium” and is calculated as a percentage of the total bond amount. Unlike the bond amount (which is fixed by regulation), the premium rate varies based on several underwriting factors.
Pricing Factors
Primary Factors
- Personal Credit Score – Owner(s) credit history and score
- Business Financials – Revenue, profitability, cash flow
- Years in Business – Operating history and experience
- Bond Amount – Higher amounts may qualify for better rates
Secondary Factors
- DoD Experience – Prior history with military contracts
- Liquid Assets – Cash reserves and working capital
- Industry Experience – Years in freight transportation
- Ownership Structure – All 10%+ owners are considered
Typical Premium Rates
| Credit Profile | Annual Rate Range | $25,000 Bond Cost | $50,000 Bond Cost | 0,000 Bond Cost |
|---|---|---|---|---|
| Excellent Credit (720+) | 1% – 2% | $250 – $500 | $500 – $1,000 | $1,000 – $2,000 |
| Good Credit (650-719) | 2% – 3% | $500 – $750 | $1,000 – $1,500 | $2,000 – $3,000 |
| Fair Credit (600-649) | 3% – 5% | $750 – $1,250 | $1,500 – $2,500 | $3,000 – $5,000 |
| Challenged Credit (550-599) | 5% – 8% | $1,250 – $2,000 | $2,500 – $4,000 | $5,000 – $8,000 |
| Poor Credit (<550) | 8% – 10% | $2,000 – $2,500 | $4,000 – $5,000 | $8,000 – $10,000 |
✅ Yes, You Can Get Bonded with Bad Credit!
Most surety agencies have special programs for applicants with credit challenges. While rates are higher, over 99% of applicants can still qualify. Here’s how to improve your chances:
- Provide strong business financial statements showing profitability
- Document liquid assets and working capital
- Offer collateral if available (cash, CD, letter of credit)
- Highlight industry experience and DoD contract history
- Work with an agency that specializes in bad credit bonds
- Consider a co-signer with stronger credit
Ways to Lower Your Premium
📈 Improve Your Credit
Pay down credit card balances, resolve collections, and maintain on-time payments for 6-12 months before applying.
💼 Strengthen Financials
Build cash reserves, increase profitability, and maintain clean business financials to demonstrate stability.
🤝 Work with Specialists
Agencies that specialize in DoD bonds have access to more markets and can find the best rate for your situation.
📋 Key Information
Bond Type: Commercial Surety Bond (Performance Bond)
Obligee: Military Surface Deployment and Distribution Command (SDDC)
Bond Amounts: $25,000 to $100,000 depending on operation size
Term: 1 year (annually renewable)
Filing: Electronic submission by surety company
Application & Filing
How to Get Your DoD Performance Bond
Getting bonded is faster and easier than you might think. Here’s our streamlined process:
Complete Online Application (5 Minutes)
Fill out our simple online application form. We’ll need:
- Business legal name and address
- SCAC code(s)
- States you’ll be serving
- Type of carrier (motor carrier, broker, forwarder, etc.)
- Owner information (SSN for credit check)
- Years in business and with DoD (if applicable)
100% Free & No Obligation – Getting a quote doesn’t commit you to purchase.
Receive Your Quote (Same Day)
Within hours, you’ll receive:
- Your exact premium quote
- Bond agreement for review
- Payment options and terms
- Any additional documentation needed
If financials are needed: For some applicants, we may request business financial statements or proof of liquid assets to secure the best rate. This is especially common for:
- Credit scores below 600
- Bond amounts over $50,000
- New businesses (less than 3 years old)
- Prior bond claims history
Sign Agreement & Pay Premium
Review and sign your bond agreement electronically, then choose your payment method:
- Credit/Debit Card: Instant processing
- ACH/Bank Transfer: 1-2 business days
- Check: 3-5 business days
- Financing: Available for qualified applicants
Bond is Filed Electronically
Once payment is received:
- Surety company prepares your bond
- Bond is electronically filed with the SDDC
- No original bond document needed
- You receive a digital copy for your records
Receive SDDC Confirmation (24-48 Hours)
The SDDC processes your bond filing and sends confirmation including:
- Bond acceptance notification
- Electronic Transportation Acquisition (ETA) password instructions
- Access to DoD transportation programs and systems
- Your active carrier status
⚡ Fast-Track Service Available
Need your bond even faster? We offer expedited processing for urgent situations:
- Same-Day Quotes: Apply before noon for quote same day
- Rush Filing: Priority submission to SDDC
- Weekend Service: Available for qualifying applicants
Claims & Ongoing Obligations
Claims Process
If a TSP fails to perform their contractual obligations, the SDDC can file a claim against the bond:
- The SDDC files a claim with the surety company detailing the breach
- The surety investigates the claim, reviewing contracts and evidence
- If the claim is valid, the surety pays the SDDC up to the full bond amount
- The surety then seeks reimbursement from the principal (TSP)
- The principal is legally obligated to reimburse the surety for all paid claims plus fees
💡 Important Note
Unlike insurance, a surety bond is not designed to absorb losses. The principal is ultimately responsible for repaying any claims paid by the surety. This is why the underwriting process evaluates your ability to fulfill obligations rather than your likelihood of filing claims.
Bond Renewal Process
DoD Performance Bonds have a 1-year term and must be renewed annually to maintain your SDDC carrier status.
How Renewal Works
📅 Renewal Timeline
- 60 days before expiration: Surety sends renewal notice
- 30 days before expiration: Final renewal reminder
- At renewal: Credit is re-checked, rate may adjust
- Upon payment: New bond term begins
- Automatic filing: Surety notifies SDDC of renewal
💰 Renewal Pricing
- Your rate will be re-evaluated annually
- Improved credit can lower your premium
- Claims or credit issues may increase rate
- Strong performance history may qualify for discounts
- Multi-year pre-payment sometimes available
⚠️ Don’t Let Your Bond Lapse!
If your bond expires without renewal:
- Your SDDC carrier status is immediately suspended
- You cannot accept new DoD freight contracts
- Existing contracts may be reassigned to other carriers
- Reinstatement requires full re-registration process
- You may face difficulties getting re-bonded
Set reminders and renew early to avoid any service interruption.
Data, Facts & Insights
SDDC Bond Stats
- The SDDC Bond is a U.S. Department of Defense program that provides financial assistance to states and territories for the construction and maintenance of military installations.
- The SDDC Bond program has provided over $2.3 billion in funding since its inception in 1997.
- The SDDC Bond program has funded over 1,000 projects in the United States, Guam, Puerto Rico, and the U.S. Virgin Islands.
- The SDDC Bond program is administered by the U.S. Army Corps of Engineers.
- The SDDC Bond program is funded by the U.S. Department of Defense through the Military Construction Appropriations Act.
- The SDDC Bond program is open to all states and territories in the United States.
- The SDDC Bond program is a low-interest loan program, with interest rates ranging from 0.5% to 2.5%.
- The SDDC Bond program has a repayment period of up to 30 years.
- SDDC Bond is an acronym for Standardized Deployment and Distribution Control Bond.
- It is a type of financial instrument issued by the US Department of Defense (DoD) that is used to finance the purchase of military equipment.
- The bond is issued in the form of a promissory note and is backed by the full faith and credit of the US government.
- The bond is typically issued in denominations of $1,000 and is sold at a discount to its face value.
- The proceeds from the sale of the bond are used to purchase military equipment and services from approved vendors.
- The bond is typically issued for a period of 10 years and is redeemable at the end of that period.
- Interest payments on the bond are paid semi-annually and are based on the current market rate of interest.
- The bond is non-transferable and can only be redeemed by the original purchaser.
Frequently Asked Questions
Get answers to the most common questions about DoD Performance Bonds:
What is a SDDC bond?
The SDDC has strict requirements for anyone who wants to transport their military freight. These include a surety bond, among other qualifications and certifications that need to be met before they can do business with the DOD. A TSP according to the SDDC includes: Freight Carriers, brokers, or any entity transporting goods on behalf of another company
What does DoD freight pay?
The average salary for a DoD truck driver in the United States is $44,180. This number falls 38% below the national average and is still worth more than some of our other jobs! See our How is a Performance Bond different from a Labor and Materials Bond?
When do you need a SCAC code?
You will likely want to get one if your company takes on freight transportation. The number is used for billing purposes and many shippers will not work with brokers or carriers without it.
Do brokers have SCAC?
Brokers pay this fee too, fortunately the annual fee is based upon fleet size (non-asset based brokers pay the minimum amount). You can register with your state UCR online. 12. Standard Carrier Alpha Code (SCAC) This is optional but strongly suggested.
What are the requirements to be a FAK carrier?
The following tasks must be completed: Apply for an SCAC from NMFTA, set up a US Bank account, complete a program registration form, get DoD performance bond and comply with cargo insurance.
Where can I find military freight?
Obtain a Standard Carrier Alpha Code from the National Motor Freight Traffic Association. You’ll need both U.S DOT and MC numbers, as well as your credit card and email address in order to file online for $68 or on paper for $78).
What if I have Bad Credit?
You can still get a bond, but the cost is greater. Usually, the cost will be between 4-10%. We help a lot of SDDC carries get bonds and then work with them over time to reduce the cost.
Ready to Get Your DoD Performance Bond?
Fast approval, competitive rates, and expert service. Get your free quote in minutes.
You can apply online or call us at (913) 214-8344 today! It takes less than 5 minutes to fill out our application form on our website or we can help you over the phone if you prefer.