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Bid Bonds

What is a Bid Bond?

bid bonds

A Bid Bond is a type of surety bond used to ensure that a contractor bidding on a project or job will enter into the contract with the obligee if awarded.

There are three parties involved in each Bid Bond:

  • The principal is the contractor who purchases the bond to guarantee financial integrity.
  • The obligee is the developer or project owner who asks for the bond.
  • The surety is an underwriter who issues the bond to guarantee that the contractor can perform the contract, should the obligee award it to them.

When Do You Need a Bid Bond?

Bid Bonds are required to bid on a contract. The Bid Bond guarantees that the Contractor will be able to secure a Performance Bond and Payment Bond in the event that the Contractor wins the bid.

Why Do You Need a Bid Bond?

Bid Bonds are meant to ensure that contractors' bid proposals are serious by demonstrating to the developers that the contractor has the ability to complete the bid. Project owners and developers began requiring Bid Bonds to combat the practice of contractors submitting low bids and then failing to complete the job or increasing the price of the job once they had been awarded the contract.

Bid Bonds Benefit the Developers (Obligees) in Three Ways:

  1. A Bid Bond demonstrates that the contractor (the principal) will be able to provide a Performance Bond if they are awarded the contract.
  2. If the developer awards the bid to a contractor who backs out, the developer can then make a claim on the bond for the difference between the principal's bid and the next lowest bid.
  3. A Bid Bond qualifies bids by ensuring that all bids are serious proposals.

How Much Are Bid Bonds Written for?

A Bid Bond is issued in the amount of the contract bid, with the same standards as that of a Performance Bond.

How Much Do Bid Bonds Cost?

Typically Bid Bonds are inexpensive. They cost anywhere from free to around $350. If the contract is awarded, the performance bond will be required. Usually, the performance bond costs between 1% and 5% of the value of the "penal sum," which is the amount that the surety will need to pay to the obligee in case the contractor breaches the contract. The cost of Bid Bonds varies based on several factors, such as the contract terms, where the bid was executed, and the bid amount.

What if You Decide to Withdraw Your Bid? Will You Lose Your Bid Bond?

If you withdraw your bid before the developer opens it, then you will not lose your bond. You will lose your Bid Bond if you withdraw your bid after you have been awarded the contract.

What Do You Need to Secure a Bid Bond?

Applying for a Bid Bond is very similar to applying for a Performance Bond, because when a surety provides you with a Bid Bond, they agree to provide a Performance Bond in the event that your bid is accepted.

To apply, you will need:

  • The amount of your bid
  • The date of the bid
  • Your bonding history (have you received bonds before)?
  • Company history – how long you've been in business.
  • Your credit score.

For bids on projects above $250,000, you will need to provide other financial information as well. Contact Viking Bond Service today for a free consultation to find out what you need to secure your Bid Bond.

Get Your Bid Bond Fast

We provide "Fast Track" programs for contracts of $250,000 or less. Our contract performance bond specialists can help get your bond request started on the correct path so that you can get your bond when you need it.

Two Easy Ways to Request a Bid Bond Quote Today

  • Call us at 1-888-278-7389.
  • OR
  • Complete the contact form on the page. One of our agents will contact you shortly.

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Viking can quote your Auto Dealer Bond within 24 hours. We provide great rates and accept good and bad credit.

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