What are performance bonds, and should our public art program require artists to hold them?

Performance bonds are intended to guarantee the satisfactory completion of work.  If a contractor is unable to finish a project, then a performance bond ensures that the work will be finished, usually by hiring a third party to complete any missing or unsatisfactory work.  These bonds are commonly used in the construction industry and many cities’ public works departments require city contractors to hold them.
However, performance bonds have little applicability to the commissioning of fine art.  For one, most commissions can only be completed by the artist who made the initial proposal, making the hiring of a third-party a nonstarter.  More over, most performance bonds are prohibitively expensive for individual artists, and the desired objective (ensuring a satisfactory final project) is better achieved through alternative actions, like withholding final payment on a contract.