A Bid Bond, or Bidder’s Bond, is issued by a bonding company, also referred to as the surety, on behalf of a contractor. It is simply a guarantee that if awarded the job the bidder will enter into the contract and be able to provide the required payment & performance bonds. If not, the surety will have to pay the bid penalty amount stated on the bid bond. You’ll find the bid bonds are required on just about every public construction bid, and many private entities will require them as well.
The limit of liability on the performance bond is typically 5% of the greatest amount bid. In some states or municipalities bid penalty amounts could be 2% or 10%, and for federal bid opportunities the penal sum amount is 20% of the greatest amount bid. If there’s a claim, the surety will have to either pay the penal sum amount of the bid bond, or the difference between the first and second place bidder, whichever is lower.
A bid bond is NOT an insurance policy. If the surety pays a claim on a bid bond they’ll look to the contractor for reimbursement. This rarely happens because the surety will not authorize a bid bond unless they’re reasonably sure they’d be willing to support the performance and payment bonds. However, the approval of a bid bond does not obligate the surety to provide final bonds if a contract is awarded.
Can Baldwin Cox Allen help with bid bonds?
We’d love to help and we never charge for bid bonds, they’re 100% free. We at Baldwin Cox Allen are here to help YOU, the contractor, with any bid bond requests you might have! Baldwin Cox Allen has been specializing in bonds for contractors since we opened our doors in 1989. We have access to over 30 well established, “A” rated and Treasury Listed sureties and we’ll search the market for the right fit for your unique needs. We’ll work hard to get the bonds approved for you, and then continue to work to improve your program and maximize your bonding capacity!