Project bonds
Bid Bonds
Submit your bid with the security the owner requires. Tell us the project and bid amount and we handle the rest.
Fast approvals and straightforward guidance.
— Josh A., Los Angeles, CA
A bid bond is a surety bond that guarantees a contractor who wins a bid will sign the contract and provide the required performance and payment bonds at the bid price. If the winning bidder backs out, the surety pays the project owner the cost difference, up to the bond amount.
You, the bidding contractor, who promises to honor the bid.
The project owner, usually a public agency, who requires the bid security.
The bond company that guarantees the bid and stands behind your ability to bond the job.
What a bid bond guarantees
A bid bond tells the owner that your price is real. If you win and then refuse to sign the contract or cannot provide the required bonds, the owner can claim against the bid bond.
The owner is usually paid the difference between your bid and the next lowest responsible bid, up to the bond amount. This is how the bond protects the bidding process.
When a bid bond is required
Most public works solicitations require bid security. The bid documents state the form and amount, which is a percentage of the bid or a fixed dollar figure. Private owners ask for bid bonds less often, but many do on larger projects.
Bid security can sometimes be a certified check instead of a bond. A bond is usually the better choice because it does not tie up your cash.
How the bid bond amount works
The amount, called the penal sum, is set by the owner. It is commonly 5% to 10% of the bid and in some cases up to 20%. Federal projects use Standard Form 24, and many other owners accept AIA bid bond forms or their own.
| Bid price | Bond at 5% | Bond at 10% |
|---|---|---|
| $250,000 | $12,500 | $25,000 |
| $1,000,000 | $50,000 | $100,000 |
| $5,000,000 | $250,000 | $500,000 |
What happens if you win the bid
You sign the contract and provide the performance and payment bonds the owner requires. The bid bond ends when those bonds are delivered. This is why sureties usually issue the bid bond only for contractors they are willing to bond on the full project.
Who needs it
Who needs a bid bond
- Contractors bidding on federal, state, or local public works
- Contractors bidding on private projects where the owner asks for bid security
- Subcontractors bidding to a general contractor that requires a bond
- Contractors new to bonded work who want to be ready before a bid is due
How it works
How to get a bid bond
Share the bid details
Tell us the project, owner, bid due date, and the bid security requirement from the solicitation.
Provide basic financials
New bonding relationships usually need a financial statement and a work-on-hand schedule. Smaller bonds may need less.
Underwriting review
An underwriter reviews your experience, credit, and capacity. Many bid bonds are approved in one to three business days.
Receive and submit the bond
You get the executed bid bond to include with your bid package before the deadline.
Cost
What a bid bond costs
Bid bonds are free. You pay nothing for the bid bond itself. Approval still goes through underwriting, because the surety is vouching that it can bond the full project if you win.
What underwriters review
- Whether the surety will also write the performance and payment bonds
- Contract size and bid amount
- Contractor experience on similar work
- Credit and financial statements
- Bid bond form and penal sum required by the owner
What to have ready
- Bid or solicitation documents showing the bid security requirement
- Company financial statement for new bonding relationships
- Work-on-hand schedule or backlog report
- Resume or list of completed projects
- Owner, project name, and bid date
By state
Bid Bond requirements by state
Pick your state for the amounts, thresholds, and agencies that apply.
Related bonds
Performance Bond
Guarantees you will finish the project under the contract terms.
Payment Bond
Guarantees you will pay your subcontractors, laborers, and suppliers.
Contractor License Bond
Required by your state or city before you can get or renew a contractor license.
Bid Bond questions
What is a bid bond?
A bid bond guarantees that a contractor who wins a bid will sign the contract and provide the required bonds at the bid price. If the contractor does not, the surety pays the owner the difference up to the bond amount.
How much does a bid bond cost?
Nothing. Bid bonds are free. Approval still goes through underwriting, and the surety is typically also the one that will write your performance and payment bonds if you win.
How much is the bid bond amount?
The owner sets it, usually 5% to 10% of the bid and sometimes up to 20%. The amount is in the bid documents.
How long does it take to get a bid bond?
Many are approved in one to three business days. If you are new to bonding, allow extra time for financial review and apply before the bid date.
Can I get a bid bond with bad credit?
Sometimes. Underwriters look at credit, experience, and financials together. Options exist for contractors with limited credit, sometimes with added collateral on the larger bond.
Is a bid bond the same as a performance bond?
No. A bid bond covers the bidding stage. A performance bond covers completing the work after you win. See the performance bond page for details.
Do I need a bid bond for a private project?
Only if the owner requires it. Public owners almost always do. Private owners ask for them mostly on larger or higher risk projects.