What it is
A bid bond is a guarantee, issued by a surety company, that a contractor who submits a bid is serious and will enter into the contract if selected. It is a form of bid bond construction owners often request on public projects and sometimes on private ones.
Three parties are involved. The principal is the contractor bidding on the job. The obligee is the project owner who requires the bond. The surety is the company that stands behind the bond. If the contractor wins but doesn't sign the contract or provide required follow-on bonds, the owner may be able to make a claim, usually within the bond's stated limits.
A bid bond is not insurance for the contractor. The surety expects to be repaid for any valid claim, and the contractor usually signs an indemnity agreement. That is why surety companies look closely at a contractor's character, capacity and financial strength.
How it’s traditionally been approached
Traditionally, project owners have used bid bonds to screen out bidders who may not be qualified or committed. By asking for a bond, the owner gains some assurance that bids are made in good faith and that the lowest responsible bidder is likely to follow through.
The bid bond amount is typically set in the bid documents, often as a portion of the bid price or as a stated figure. The exact amount, form and deadline vary by state, agency and project, so the solicitation itself is the place to look. Many owners also require the bid bond to come from a surety licensed in their state.
Bid bond requirements often appear alongside other bonds. A common pairing is a bid bond followed by a performance bond and payment bond once the contract is awarded. The bid bond vs performance bond distinction matters: the bid bond covers the bidding stage, while the performance bond covers completion of the work after award.
How the right surety agent may help
The right surety agent may help you understand how to get a bid bond and what the surety will want to see. A first conversation is generally about your business: the kind of work you do, your experience, your finances and the projects you're pursuing. Some agents can explain the process in plain terms before you commit to anything.
Many contractors find it helpful to ask questions such as: What documents will I need? How long does the process usually take? Does the bid bond come with a commitment for the later performance and payment bonds? What happens if I'm not the low bidder? An agent may also explain how your financial records are typically reviewed.
A good agent may also help you read the bid documents so the bond form, amount and deadline match what the owner asks for. Approval and terms depend on the surety's underwriting, and no agent can promise a particular outcome, bond capacity or contract award. Always confirm requirements with the project owner or contracting agency.
The bigger picture
Bidding on work can be exciting and stressful at once. Deadlines, paperwork and the pressure to win can weigh on your sleep, your relationships and your sense of control. Understanding the bid bond process ahead of time may help you feel more prepared and less rushed.
It can also help to look at the bigger picture: your finances, your team and your own wellbeing. Taking breaks, asking questions and leaning on trusted advisors are all reasonable ways to protect your peace of mind. If the business side feels heavy, Providers.plus may be one place to explore additional support resources.
Keep in mind
- This page is general education about surety bonds, not legal, financial or insurance advice.
- Bid bond amounts, requirements and procedures vary by state, agency and project, so confirm details with a licensed surety agent or broker and the project owner.
- Getting a bid bond does not guarantee approval for later bonds, a specific bond capacity or a contract award.
- Withdrawing a bid or failing to sign a contract can have consequences, so review the bid documents and talk with a qualified professional before you submit.
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Frequently asked questions
What is a bid bond?
A bid bond is a surety-backed guarantee that a contractor submitting a bid will sign the contract and provide any required bonds if selected. It gives the project owner some protection if the winning bidder walks away. It is a common type of construction bond used in the bidding stage.
What is a bid bond in construction used for?
In construction, a bid bond helps project owners confirm that bidders are serious and financially capable. It may help the owner avoid the cost and delay of re-bidding if the selected bidder backs out. Owners decide whether to require one, so check the bid documents.
What is the typical bid bond amount?
The bid bond amount is set by the project owner or contracting agency and is stated in the bid documents. It is often tied to the bid price, but it varies by state, agency and project. Confirm the exact figure with the owner and a licensed surety agent.
What is the difference between a bid bond vs performance bond?
A bid bond applies before the contract is awarded and backs up your promise to enter into the contract if you win. A performance bond applies after award and backs up your promise to complete the work as agreed. Many projects require both, along with a payment bond.
What happens if a bidder walks away after winning?
If a winning bidder refuses to sign the contract or provide required bonds, the owner may be able to make a claim on the bid bond, generally within its stated limits. The surety may then seek repayment from the contractor under the indemnity agreement. Specific outcomes depend on the bond terms and the project's rules.
How do I get a bid bond?
To get a bid bond, you typically work with a licensed surety agent or broker who submits your information to a surety company for review. Expect to share details about your business, experience and finances. Approval is not guaranteed, so it's wise to start early and confirm bond requirements with the project owner.
Educational resource. Construction Performance Bond shares general information and connects people with independent surety agents. It is not professional advice. Talk with a qualified professional about your own situation.