What is a Bid Bond?
A bid bond is required by some government entities and general contractors to bid on a construction contract. They provide a financial guarantee that your company will enter into a contract at your bid price. The bid bond can be claimed on by the entity who let the bid if you choose not to enter the contract if it’s awarded to your company. It’s often referred to as a bid guarantee or bid security. In most cases, your bid bond will be replaced by a performance and payment bond.
What Bid Bond amount do I need?
The bid bond amount is determined by the bid letter your bid specifications or bid packet. A bid letter is the person or entity who makes the contract available for bid. In general, the amount needed will be in between 5-15% of your bid price. For example: If your bid price is $100,000, your bond amount will be between $5,000 and $15,000. This means the bid letter can claim make for $5,000-$15,000 on your bid bond if you are awarded the contract and fail to enter it.
Where do I get a Bid Bond?
These bonds are obtained from a surety bond agency. A surety agency is a company who places bonds with insurance companies on behalf of contractors like yourself. Most of them can be issued using a simple application but larger bonds may require additional information about you and your company. This additional information can include corporate and personal financial statements, job cost breakdowns, and other items. These items help a surety company to better understand your business and allow for bonding on larger projects.
How much does a Bid Bond cost?
The cost of a bid bond is normally zero. This is because they are often replaced by other surety bonds when the contract has been awarded as mentioned below. However, some surety companies (not agencies) have started charging for them. This is usually because a contractor uses them infrequently or an obligee often waives a requirement for performance and payment bonds once the job is awarded. This practice is also used, in some cases, when letters of bondability or reference letters are requested by general contractors using subcontractor default insurance.
What happens to my bid bond if I win the contract?
Remember, these bonds guarantee you’ll enter the contract if awarded. It also guarantees that you will provide the necessary items required to enter the contract. These items often include proof of insurance, performance bonds, and a signed contract. The bid guarantee is then released once those items have been provided.
How do I apply for a bid bond?
The easiest way to apply for one of these bonds is to complete our bid bond request form. Your completed form allows us to see if you can use one our simple applications. Simple or “fast” applications are easy to complete and make the process of obtaining a surety bond much easier. Your company may not qualify for these applications if the project size exceeds a certain amount or you’re performing environmental work. Please email us at email@example.com or call us if you have any questions.
How long does it take to get a bid bond?
The answer depends on the bid amount and the information you provide to the surety. As mentioned above, smaller requests can be processed faster than large ones. This is because there’s a lower level of risk to the insurance company in most cases. Also, the more information you have such as a copy of the bid specs and completed application, the faster your request can be processed. Additionally, requests for companies with established surety programs can get bid bonds much faster than those companies who are new to bonding.