Bid Bonds
A bid bond guarantees that if you win a bid, you will sign the contract at your bid price and provide any required performance and payment bonds. If you back out, the project owner can make a claim against the bond to recover its loss. Bid bonds are common on public construction projects and are often required by private owners too.
How a bid bond works
The bond is an agreement among three parties: you, the bidder (principal); the project owner that requires the bond (obligee); and the surety that issues it. If you win and then refuse to sign the contract or can't provide the required bonds, the owner may award the job to the next bidder. The bond can cover the owner's loss, often the difference between your bid and the next one, up to the bond amount. If the surety pays a claim, you must repay the surety.
Bid bond vs. performance bond
A bid bond covers the bidding stage: it guarantees you will accept the contract if you win. A performance bond covers the work itself: it guarantees you will complete the project according to the contract. When your bid is accepted, you will usually need to provide performance and payment bonds before work begins.
Bond amount and your premium
The bid documents set the bond amount, usually as a percentage of your bid price or a fixed dollar amount. That is the most the surety will pay on a claim, not the price you pay. Your premium depends on the surety's underwriting, including your credit, financial statements, experience and the size of the project. Request a quote for your bid rather than relying on a fixed price or percentage.
How to apply
Apply well before the bid deadline, since the bond must be submitted with your bid. Start the online application with your business information and the bid details. WWIS will review your submission and help you with the quote, required documents and issuance. Approval and timing depend on the surety and a complete application.
Information needed to apply
- The bid invitation or solicitation, including the project owner, project description and bid due date.
- Your estimated bid amount and the bid bond amount or percentage the bid documents require.
- Any bond form the owner requires. Federal bids use Standard Form 24, the federal bid bond form.
- Business and personal financial information, plus your experience with projects of similar size.
Bidding on a federal project?
Federal agencies require a bid guarantee only when the contract also requires a performance bond or performance and payment bonds. When one is required, it must be at least 20% of your bid price, up to $3 million. State and local governments set their own bid bond rules for public projects.
Get help with your application
Call 888-518-8011 or email [email protected] for help with your bid bond and application.
If you or your business needs help in obtaining a surety bond or commercial insurance give us a call!