WHAT IS A BID BOND & WHAT DOES A BID BOND DO?
This keeps you as the contractor from increasing the bid on a project after entering into a contract with the project owner (obligee). A bid bond gives the project owner the peace of mind that the low-bidding contractor will adhere to the contract price quoted in the winning bid.
Bid bonds also contain contract language that the contractor will secure all necessary performance and payment bonds required for the project. This guarantees your work and protects the project owner.
The bid bond is only 5% of the total contract. Why am I being evaluated for a bond the size of the entire contract?
The bid bond is both a percentage of contract security and evidence of prequalification for the ultimate contract value. Thus, consideration of the full contract amount on bid day is necessary while the bid bond is being considered. If the contractor is deemed qualified to perform the contract, the bid bond is issued. If the contractor is deemed unqualified to perform the work, the bid bond will not be approved, notwithstanding that the bid bond is only a small percentage of the contract amount.
What is the cost of a bid bond?
Unlike some other agencies, we do not charge for bid bonds. Once your bond line is established with one of our 80+ sureties, we provide free bid bonds at no cost. We will also supply you with a letter of bondability, also sometimes referred to as a good guy letter, at no cost. The only time you pay is when you're awarded a project and need a PERFORMANCE & PAYMENT BOND.
How do I get a bid bond?
The prequalification process includes requesting information tailored to your specific needs. Depending on the size bond needed it can be as simple as a two-page application. Once the underwriting file has been completed, your agent can approach the marketplace to secure your bond program with one of our many surety partners.
Often a contractor new to bonding will do the leg work on the bid and worry about setting up their bond line at the last minute. Considering the time and money spent on pursuing a project, this can be costly. We recommend being proactive and having a clear understanding of what your Single & Aggregate bond program is.