A bid bond is used to guarantee that a proposal submitted by a contractor will be honored.
- Submitting a bid with a bid bond requirement
- Trying to increase the competitiveness of your bid by providing legal and financial assurances of performance.
A bond is a payment of collateral ensuring that someone will perform a certain legal duty. A bid bond is sometimes used by contractors to give the owner of a project extra assurance that they will live up to the terms of their bid if they are hired for the job.
A bid is an offer of some good or service, in exchange for something valuable, known as “consideration.” Bids are often submitted in response to requests for proposals, and this is a very common way that many contractors land new jobs.
Sometimes the owner or manager of a project accepting bids will require a bid bond, which is a small deposit – typically no more than 10% of the value of the contract – that the contractor puts up as a guarantee that she will perform as specified in her bid. If the bid is accepted and the contractor cannot move forward with the job as anticipated, the bid bond is forfeited.
If you are required to submit a bid bond, make sure that it meets the project owner’s specifications and binding legal requirements. Use this interactive form to define the terms of a bid bond in a clear, well-organized way that will help you stay on top of your legal and financial obligations.