Bid Bond Guide

A bid bond is a guarantee that the bid you submit for a project (usually public construction jobs) is accurate and will post a performance bond. If your bid is inaccurate or you can't fulfill the obligations of your bid, a claim can be made against your bid bond which you’re responsible to pay.

It's important to keep in mind there are costs for the obligee to set up and execute a proper bidding process for a public job.

The obligee has to employ architects and engineers to evaluate the bids from different contractors, organize pre-bid meetings to go over project specifics with contractors who have expressed interest in the project, and promote the actual bid date so there are plenty of contractors to choose from. The bid bond ensures the obligee isn't left out to dry if you decide to abandon the project.

Bid bonds are submitted with your proposal to the obligee (the person or entity requiring the bond). If your bid is inaccurate, you win the project but back out of the job or cannot post a performance bond,a claim can be filed on your bond that you must pay, and you will likely lose the job.

This often happens when a contractor underestimates the costs by missing a major expense for the job, and as a result is unable to get approved for the performance bond required to perform the work.

It's important to keep in mind there are costs for the obligee to set up and execute a proper bidding process for a public job.

The obligee has to employ architects and engineers to evaluate the bids from different contractors, organize pre-bid meetings to go over project specifics with contractors who have expressed interest in the project, and promote the actual bid date so there are plenty of contractors to choose from. The bid bond ensures the obligee isn't left out to dry if you decide to abandon the project.

Bid proposals without a valid bond included are rejected. If you are awarded the job, you usually will have to provide a performance bond to start the project. If you'd like to learn more about what surety bonds are and how they work, you can read our detailed guide here.

What is The Required Bid Bond Amount?

You’ll likely need to get a bid surety bond that’s a specific percentage of the total estimated contract amount (most commonly about 5-10% of the total contract cost).

This means if the project you're bidding on is estimated to cost $500,000 and you're required to get a 10% bid bond, you need to get a $50,000 bid bond. Keep in mind, the bid bond amount you need will vary by each job and obligee.

Who Requires Bid Bonds?

Bid bonds are typically required by law for public jobs since taxpayer money and other federal, state or local money is used to fund the project. Most private jobs also require bid bonds to protect project and facility owners.

Most bid bond providers charge a flat fee of $100 (our company provides them free of charge in most cases). If you want to see if you quality for bid bonds, please fill out our online application. You can learn more about surety bond costs and how they are determined by reading our comprehensive pricing guide. You can also take a look at our most frequently asked surety bond questions.

You’ll need to send your bond agency the bid invitation letter, bid request form and job specifications that you get from the obligee for all bid bond requests. Our company can provide you copies of the AIA bid bond form, as we have all industry standard forms on file. However, if the obligee has their own specific bond forms you’ll need to get the forms from them.

Check out our construction bonds guide where you’ll find every bond you need to work on public projects. However, you need to provide more than just the items listed above when requesting bid bonds for larger projects.

Our company has bonded thousands of construction projects over the years. You can take a look at some of our most notable bonded projects here.

We created a comprehensive guide which explains everything you must know in order to bid on and win projects. The topics covered in the e-book include:

• The pros and cons of bidding on public construction projects
• Bid solicitation procedures
• What influences the bid process
• How to bid on public projects
• Surety bonds for bidding and construction
• Why you need to understand bond claims

There are several types of insurance coverages that are recommended for contractors, but the recommended coverage will vary based on your operation.

If you’d like to learn more about all of the insurance coverages available to you, please read our contractor insurance guide.