Process
Bid bond
Also called: Bid guarantee
Definition
A bid bond is a surety instrument submitted with a contractor's bid, guaranteeing that if the bid wins, the contractor will sign the contract and provide the required performance and payment bonds.
On public work and many larger private jobs, the owner requires a bid bond — commonly five to ten percent of the bid amount — before a bid is even considered. If the winner walks away or cannot deliver the required performance and payment bonds, the surety compensates the owner up to the bond's stated limit, then looks to the contractor for reimbursement.
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