The Bid Bond protects the owner or developer in a construction project by providing financial guarantees if the winning bidder defaults. It is meant as a form of insurance to safeguard risks that come along with bidding on contracts. An unsuccessful bidder may have limited unencumbered assets worth less than $500,000.00 that would prevent it from performing its obligations under the agreement, resulting in increased cost for the general contractor and costly disruptions to completion, and substantial delay of project schedule.
Bid Bonds incorporates both public and private construction projects. If you’ve never heard of them before now, don’t worry, you’re not alone! But understanding these bonds is essential to stay informed about potential risks associated with your business.
Bid bonds are a common requirement on projects that also involve performance bids and payment bonds.