As a contractor you would like to do jobs that are larger. You have work in many areas and have found that you can do jobs that are larger than what you have done in the past. You get the plans on a job. You start the process of getting the numbers together so that you can give a bid. Now you at the point in the contract that they are talking about a Bid Bonds, Performance and Payment bonds. You have never had to get a bond before and you do not know where to start.
You go to a company that works with Bid Bonds and they tell you since this is your first job that you must have cash collateral for your bid bond and your working capital must be strong enough to carry the job forward. You still do not know what they are talking about.
First, a bid bond is an instrument that you have to post with your bid when that job requires a performance and payment bond. The bid bond tell the owner of the contract that you have the financial backing to do the job.The Bid Bond is usually in the range of 5% to 20% of your estimate. It has do go with the estimate at time of Bid.
A bid bond can be cash collateral, such as a money order,cashier check, made to the order of the contract that you are bidding. It cannot be a business check or a personal check. It also can be a guarantee from a bank or a letter of credit form a bank that is insured by FDIC. The most common way is to get a bid bond is from a bonding company that you have work with.
With the bid bond you are now allowed to bid the job. If you are the lowest bidder than the next step is to get the performance and payment bond that is required by the contract. If you put up a cash collateral then you must find a bonding company that will furnish you the necessary bonds.
What usually happens at this time is that you do not have a bonding company that will work with you and you have to turn the job back because you cannot get a Performance and Payment bond. The cash collateral you have posted with them they keep because you did not get the required bonds to move forward. The job is awarded to the next bidder that can furnish the performance and payment bond.
Since you have just lost your cash that you put up for the bid bond you make the decision never to bid a job that needs a bond .
There are options avaible to you if you really need a bond. You just have to find them.
If you need help contact Ric Cline at 719-588-3601 or toll free at 1-800-772-9904 and he will work with you to get what you need to participate in a larger market
Bid Bond Express
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