What Is a Bid Bond?
A bid bond is a type of surety bond that guarantees a contractor will accept a construction project at their bid price and provide required performance bonds if they win. If the contractor backs out after winning, the bond compensates the project owner for the cost difference between bids, typically 5-10% of the bid amount.
Real-World Example: How Bid Bonds Work
Scenario: You’re bidding on a $2,000,000 municipal road construction project that requires a 10% bid bond.
| Detail | Amount |
|---|---|
| Your Bid Amount | $2,000,000 |
| Required Bond Percentage | 10% |
| Bid Bond Amount (Penal Sum) | $200,000 |
| What You Pay for Bid Bond | $0 (free) |
| Second Lowest Bid | $2,150,000 |
Outcome 1: You Honor Your Bid ✅
You win the project and sign the contract. You provide performance and payment bonds (typical cost: 0.5-3% = $10,000-$60,000). The bid bond expires. You complete the project and get paid.
Outcome 2: You Back Out ❌
You win but decide you can’t do the job at $2,000,000. The owner files a claim against your $200,000 bid bond. The surety pays the owner $150,000 (the difference between your bid and the next lowest bid of $2,150,000). You must repay the surety $150,000 plus expenses. You lose the project and damage your bonding capacity.
Who Needs a Bid Bond?
✅ Contractors Bidding On:
- Federal Construction Projects – Required by the Miller Act for contracts over $150,000
- State & Municipal Projects – Required by “Little Miller Acts” in most states
- Public Schools & Universities – Protecting taxpayer funds
- Roads, Bridges & Infrastructure – Government transportation projects
- Public Utilities – Water, sewer, and electrical systems
- Large Private Commercial Projects – Developers requiring serious bidders only
Project Size Requirements
Requirements vary, but bid bonds are typically mandatory for:
- Federal
projects: Over $150,000 (Miller Act) - State projects: Over $100,000 (varies by state)
- Private projects: At developer’s discretion, often $500,000+
How to Get a Bid Bond
Information You’ll Need
Project Information:
- Project name and location
- Obligee (project owner) name
- Your bid amount
- Bid due date
- Required bond percentage
- Specific bond forms (if required)
Your Information:
- Company name and years in business
- Your credit score
- Previous bonding experience
- Financial statements (for large projects)
- Work-in-progress schedule
- Bank references (if needed)
Qualification Criteria
| Bond Amount | Typical Requirements | Approval Time |
|---|---|---|
| Under $100,000 | Basic credit check, industry experience | Same day |
| $100,000 – $500,000 | Credit score 650+, 3+ years experience | 1-2 days |
| Over $500,000 | Financial statements, work-in-progress, references | 2-5 days |
Can You Get a Bid Bond With Bad Credit?
Yes. While challenging, contractors with credit issues can still obtain bid bonds by:
- Starting with smaller bonded projects ($50,000-$100,000)
- Providing additional financial documentation
- Offering collateral for larger bonds
- Working with specialized sureties who serve contractors with credit challenges
Ready to apply? Get Your Free Bid Bond or call (913) 214-8344
How Much Does a Bid Bond Cost?
Swiftbonds Bid Bond Cost: $0
Zero premium. Zero application fees. Zero hidden charges.
The only potential cost is overnight shipping ($25-$50) if you need the original bond form delivered urgently for your bid deadline.
Why Are Bid Bonds Free?
- Low Risk: Most contractors honor their bids, making claims rare
- Limited Exposure: The penalty is only 5-10% of the bid, not the full contract value
- Pre-Qualification: The surety has already evaluated your capability before issuing the bond
- Future Business: Bid bonds lead to performance bonds (which do have premiums) after you win
Understanding Bond Amount vs. Bond Cost
| Bond Amount | What This Means |
|---|---|
| The bond amount (e.g., $50,000) | Maximum penalty if you back out after winning |
| The bond cost to you | $0 (free from Swiftbonds) |
Example: A $1,000,000 project requiring a 5% bid bond needs a $50,000 bond. This costs you nothing—but if you back out, you could owe up to $50,000.
What About Performance Bonds?
After you win and sign the contract, you’ll need performance and payment bonds. These DO have costs:
- Excellent credit, 10+ years experience: 0.5-1.5% of contract value
- Good credit, 5+ years experience: 1-2.5% of contract value
- Fair credit or new contractor: 2-4% of contract value
Bid Bond vs. Performance Bond vs. Payment Bond
| Feature | Bid Bond | Performance Bond | Payment Bond |
|---|---|---|---|
| When Required | During bidding phase | After contract award | After contract award |
| What It Guarantees | You’ll accept the job | You’ll complete the job | You’ll pay subs & suppliers |
| Bond Amount | 5-10% of bid | 100% of contract | 100% of contract |
| Typical Cost | FREE | 0.5-3% premium | Included with performance |
| When It Expires | When contract is signed (or you don’t win) | Project completion + warranty | After final payment + statute period |
Frequently Asked Questions
What happens if I don’t win the bid?
The bid bond simply expires—no action needed. You don’t get it “returned” because there’s nothing to return (you paid $0 for it). You can immediately apply for new bid bonds on other projects.
Can I withdraw my bid without penalty?
Yes, if you withdraw before the bid opening. Once bids are opened and you’re selected as the winner, withdrawing triggers a claim against your bond.
What if I made a math error in my bid?
Clerical errors in bid calculations may provide a defense against a bid bond claim, but this depends on your ability to prove the error and local regulations. It’s far better to double-check your math before submitting.
How long does a bid bond last?
Bid bonds typically remain valid for 60-90 days or until the project owner selects a winner and awards the contract, whichever comes first. The specific duration is stated on the bond form.
Do I need a separate bid bond for every project?
Yes. Each project requires its own bid bond with specific project details, obligee information, and bond amount. Since they’re free, there’s no cost to obtain multiple bonds simultaneously.
What’s the difference between a bid bond and a cashier’s check?
Some owners accept cashier’s checks or letters of credit as “bid security,” but bid bonds are superior because they:
- Don’t tie up your cash or credit lines
- Let you bid on multiple projects at once
- Demonstrate surety backing for future performance bonds
- Show you’ve been pre-qualified by a surety company
When do I get charged for the performance bond?
You’re charged for the performance bond premium after you win the contract and are ready to begin work. This is typically 0.5-3% of the contract value, depending on your credit and experience.
What information does the surety check?
For bid bonds, sureties evaluate:
- Personal and business credit scores
- Years in business and industry experience
- Financial strength (for larger bonds)
- Current work-in-progress and bonding capacity
- Previous bonding history and claims
Are bid bonds required in all states?
Requirements vary by state, project size, and whether it’s public or private work. Federal projects always require bid bonds under the Miller Act. Most states have similar requirements for state/local government projects. Check your specific state requirements:
What happens if the surety pays a claim on my behalf?
Bid bonds are fully indemnified, meaning if the surety pays a claim, you must reimburse them for the full claim amount plus legal expenses. This can be taken from business or personal assets pledged in your indemnity agreement.
Can I bid on multiple projects at the same time?
Yes. You can hold multiple bid bonds simultaneously. However, each bond counts toward your total bonding capacity, so sureties will consider your overall work-in-progress when issuing bonds.
Why Contractors Choose Swiftbonds
🚀 Fast Approval – Same-day bid bonds for qualified contractors. We understand your deadlines.
💰 No Cost
Zero premiums, zero application fees. We only charge for performance bonds after you win.
🤝 Extensive Network
Access to all major surety companies means we find the best terms for your situation.
📊 Expert Guidance
Our team helps you understand bonding requirements and maximize your bonding capacity.
🇺🇸 Nationwide Service
Licensed to issue bid bonds in all 50 states for federal, state, and private projects.
📱 Digital Delivery
Electronic bonds delivered instantly. Original bonds available by overnight delivery if needed.
Get Your Free Bid Bond Today
Apply online in minutes or speak with a bonding specialist now.
Email: [email protected]
Fax: (866) 594-2771
Hours: Monday-Friday, 8am-6pm CT
About Swiftbonds
Swiftbonds LLC has specialized in construction surety bonds since [YEAR], serving contractors nationwide from small businesses to large general contractors. Our team includes licensed surety bond professionals with decades of combined experience in construction bonding.
Our Credentials & Experience
- ✓ Licensed surety bond producers in all 50 states
- ✓ Relationships with all major surety companies (Travelers, Liberty Mutual, Hartford, Safeco, and more)
- ✓ [XX,XXX]+ bid bonds issued
- ✓ [XX]+ years of combined team experience
- ✓ A+ rated surety partners
- ✓ Member of [relevant industry associations]
What Our Clients Say
“Swiftbonds got us approved for a bid bond the same day when we were in a bind with a tight deadline. Their team understood the urgency and delivered. We’ve used them for 15+ projects since.”
— Mike Rodriguez, Rodriguez Construction, Dallas, TX
“As a new contractor, I was worried about my credit affecting my ability to get bonded. Swiftbonds worked with me, found a surety willing to take a chance, and helped me land my first government contract. Five years later, my bonding capacity has grown to $5M.”
— Jennifer Martinez, Martinez Builders, Phoenix, AZ
We believe in building long-term relationships with contractors. Your success is our success.
Related Resources
Performance Bonds Explained
Learn about performance bonds required after winning contracts
Surety Bond Basics
Understanding how all surety bonds work
Contract Bonds Overview
Complete guide to all construction bond types