FOR ALL YOUR SURETY BOND NEEDS.
These surety bonds are general for all states.
Learn more about bid bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
What Are Bid Bonds?
A bid bond is often required in order to bid on a construction project. The bond serves as a guarantee that the bidder is qualified to do the work if awarded the contract and has the financial capacity and cash flow to complete the job for the bid price. As the most common reason for refusing a contract award is the contractor’s inability to qualify for a performance bond, requiring a bid bond provides legal and financial protection for the project owner.
The bond also guarantees that, if awarded a contract, the contractor will obtain all other necessary surety bonds, such as a performance bond, payment bond, or maintenance bond. These bonds are commonly used for both public works projects and private development and construction projects.
Who Needs Them?
When a public or private project owner requires bid bonds from contractors vying for the job, each contractor (principal) submitting a bid must submit a bond or put up cash along with their bid. A bid bond obtained from a surety company is often the more cost-effective option for contractors, as it does not strain their cash reserves or credit lines.
How Do They Work?
If the contractor is awarded the job but fails to enter into the contract, the project owner (the obligee for the bond) will have to go through the hassle of selecting a “runner-up” and extending an offer. These bonds entitle the obligee to be paid the difference between the contractor’s bid price and the next closest bid. The surety company will pay the obligee’s claim and then collect a fee from the contractor, which is usually 10% of the bid amount.
What Do They Cost?
The amount of a bid bond should be no more than 10% above the total amount of the contract, but the premium is usually a flat $100 fee per bid for applicants who are approved. Approval is granted through a process that includes a financial review and background check. Specific factors that are considered include the contractor’s personal credit history, financial condition, and industry experience, as well as the company’s business financial statements.
Apply Now
Use our convenient online system to apply for a bid bond today.
