Bid Bond Guide

A bid bond is a type of surety bond that guarantees a contractor’s bid is accurate and that they will follow through if awarded the job. It assures the project owner (the obligee) that the contractor will provide a performance bond and begin work at the price and terms proposed.

If the contractor backs out, can’t get a performance bond, or underbids the project and can’t follow through, the obligee can file a claim against the bid bond to recover costs.

This protection is especially important for public construction projects, where the bidding process requires time and money to organize. Public agencies typically invest in:

• Architects and engineers to review proposals
• Pre-bid meetings with interested contractors
• Promotion of the project to ensure competitive bids

A bid bond ensures that effort isn’t wasted if a contractor walks away after being selected.

A bid bond is submitted with your proposal to the project owner (the obligee). It guarantees that your bid is legitimate and that you’ll accept the job — and provide a performance bond — if you’re awarded the contract.

If you submit a low bid but later back out, or you can’t secure the required performance bond, the obligee can file a claim against your bid bond. You’ll be responsible for paying the claim, and you’ll likely lose the job.

This situation often happens when a contractor underestimates project costs — for example, by missing a major material or labor expense. If that mistake makes it impossible to get a performance bond, the bid bond helps protect the project owner from financial harm.

Bid bonds are typically valid for a set time period during which the project owner selects a winning bidder and finalizes the contract.

Bid proposals without a valid bond are typically rejected — especially for public construction jobs. These bonds are a critical part of the bidding process, helping project owners avoid wasted time and resources.

If awarded the project, the contractor must also provide a performance bond and a payment bond to move forward. Want to understand how surety bonds work overall? Read our detailed guide here.

What is The Required Bid Bond Amount?

The amount of a bid bond – also known as the penal sum – is usually a percentage of your total estimated project cost — most commonly 5% to 10% of the bid amount.

Example:

If you’re bidding on a $500,000 job and the requirement is a 10% bond, you’ll need a $50,000 bid bond.

The exact percentage varies by project and obligee, so always check the specific requirements listed in the bid documents.

Who Requires Bid Bonds?

Bid bonds are typically required for public construction projects at the federal, state, or local level because they involve taxpayer money. Government agencies want to ensure only serious, qualified contractors submit bids.

Many private project owners also require bid bonds as a way to protect themselves during the bidding process.

In most cases, bid bonds cost around $100 — but many surety companies (including ours) offer them free of charge for qualified contractors.

Unlike performance or payment bonds, bid bonds are relatively low risk for the surety provider, which is why fees are often waived.

Want to See If You Qualify?

You can apply online here in just a few minutes.

Need more details on pricing? Check out our:

• Surety Bond Cost Guide
• Surety Bond FAQ

To request a bid bond, you’ll need to provide a few documents from the project owner (obligee), including:

1. Bid invitation letter
2. Bid request form
3. Job specifications

These documents give your surety provider the details they need to underwrite the bond and issue it quickly.

Standard Bond Forms

We have all industry-standard forms on file, including the widely used AIA bid bond form. If your obligee requires their own version, you’ll need to request it directly from them.

Working on Larger Projects?

For bigger jobs, you may need to submit additional financials or documentation. Check out our guide to construction bonds for a full list of the bonds you may need to work on public projects.

JW Surety Bonds has provided bid bonds for thousands of construction projects across the U.S., from small local builds to large-scale public works.

Want to see examples? Browse some of our most notable bonded projects here.

Want a step-by-step breakdown of how to win public construction jobs?

We created a free guide that walks you through everything you need to know — from understanding the bid process to securing the right bonds.

Inside the Guide:

• Pros and cons of bidding on public projects
• How public bid solicitations work
• Key factors that influence bid selection
• Steps to submit a competitive bid
• How surety bonds fit into the process
• Why understanding bond claims matters

Contractors often need more than just bonds — insurance is another key part of protecting your business.

There are several types of insurance coverage that may be required or recommended, depending on your operation. These can include:

• General liability insurance
• Workers’ compensation
• Commercial auto insurance
• Builders risk insurance

To learn more about what coverages might apply to your business, check out our full Contractor Insurance Guide.

 What is the meaning of a bid bond?

A bid bond is a type of surety bond that guarantees a contractor’s bid is accurate and that they’ll accept the job and provide a performance bond if selected. It protects project owners from bidders who back out or can’t follow through.

What does a 5% bid bond mean?

A 5% bid bond means the bond amount must be equal to 5% of your total bid.

For example, if you’re bidding $200,000 on a project, you’ll need a $10,000 bid bond.

What is the difference between a bid bond and a payment bond?

A bid bond guarantees your intent and ability to take the job if awarded.

A payment bond guarantees you’ll pay all suppliers, subcontractors, and laborers involved in the project.

Bid bonds are submitted with your proposal, while payment bonds are required once the job begins.

Do you get your money back from a bid bond?

Yes. If your bid bond has a fee (often around $100), it’s a one-time cost — but many surety companies, including ours, offer bid bonds for free. There’s no refund involved, but there’s also usually no large out-of-pocket cost.

How do I qualify for a bid bond?

Smaller contractors are often approved based on personal credit, while larger bond amounts may require financials, experience history, or business strength.

Apply online here to find out if you qualify.