For all bids greater than $100,000, get our Express Application form:
- Complete the form and email to [email protected].
- Be sure to include the RFQ/ITB (bid specs from the obligee).
What is a Bid Bond?
A bid bond is a type of surety bond, which guarantees that the bidder will accept the project and complete it according to its terms.
Call us now – (913) 214-8344 to get the cheapest, fastest bid bonds. Our expert team will get you exactly what you need, fast! So you can get to work.
Swiftbonds is the leading provider of Bid Bonds in the nation. We say that with a bit of pride, and a bit of humility because we know that it's really you, our customers, that make us who we are.
We've worked tirelessly over the years to create a place where you can find the very best premium bid bonds for your projects. We've developed relationships with nearly every surety bond provider so that we can pick and choose the right party for you.
Why do you need a bid bond?
Bid bonds provide assurance to the project owner that the bidder has the expertise and wherewithal to finish the job once you are selected. The simple reason is that you need one in order to get the work.
But the bigger question is why are more owners/developers requiring a bid bond? The simple answer is risk. Given the uncertainty of the marketplace, which includes long-time contractors and subcontractors closing their doors, to municipalities filing bankruptcy (or just slow paying), has led to the owners being afraid that their contractors will be unable to complete the work. So, they require some protection. It shows that you have the financial ability to do the job.
When are Bid Bonds Issued?
A bid bond is issued as part of a bid by a surety bond company to the project owner. The owner is then assured that the winning bidder will take on the contract under the terms at which they bid.
What if you Bid Without a Bid Bond and Instead use a Cashier's Check?
Most bids either contain a bid bond or contain a cash deposit requirement, which is subject to full or partial forfeiture if the winning contractor fails to either execute the contract (or come up with a payment bond or performance bond – depending on how the bid process is structured). The bid bond assures that, should the bidder be successful, they will sign the deal and provide the required surety bond. The bid percentage (usually five or ten percent 5, 10%) is forfeited if you don't accept the job.
The Bid Bond prequalifies the principal and provides the necessary security to the owner or general contractor, or “obligee,” guaranteeing that the principal will enter into the contract, if it is awarded.
How Do Bid Bonds Work in the Typical Construction bid Scenario?
A Bid Bonds guarantee that the “obligee” will be paid the difference of the principal's tender price and the next closest tender price. This action is only triggered should the principal be awarded the contract but fails to enter into the contract, as agreed, with the obligee. The penalty on a bid bond is generally ten percent of the tender price of the bidder. Contractors really prefer to use these as they are a less expensive option than others available. They also do not lock up cash or bank credit lines while the bidding process is ongoing. General Contractors and Owners also like to use them for the reason that they establish and endorse that the bidding contractors (or suppliers) are supported by the financial backing of a Surety Company and is, therefore, qualified to tackle the project.
How does this Help the Owner of the Project?
Project owners are more comfortable awarding projects to bidders that have a bid bond as the penalty provision keeps bidders from submitting a frivolous bid, because they are obligated to work on the contract or pay the penalty provision. If a surety has to pay a project owner the penalty provision, then the surety will look for reimbursement by the bidder.
How Do I Get a Bid Bond?
Requirements for Bid Bonds
The Miller Act governs all federal jobs and most states have passed similar statutes for local government work. Thus, bidders for a federal job are required to have a bid bond for their federal jobs. You need to know the ins and outs of the process so that you can bid properly and get the job and then start work.
Federal Job requirements
For bonds on federal jobs, this is what is normally needed:
- For each individual job, the bond needs to have a bond amount attached for the full contract price as well as the percentage damages for the bid if the bidder does not take the job
- Active bonds that are issued by a corporate surety company that is approved.
- If the proposed surety is a company or individual, then the company/individual must show sufficient resources to provide a guarantee sufficient for the government.
What do Surety Companies Look at When Supporting a Bond?
To support single bonds, surety companies accept:
- Letters of credit
- Assets that are marketable
- Cash flow
- Strong balance sheets
- Reputation of the company
What do Bid Bonds Cost?
We do not charge for a bid bond, except for any overnight fees to get you the original bid bond paperwork for the bid deadline. Many entities do not require the original bid bond paperwork and will accept the electronic copy (which you sign). The reason why there isn't any bid bond cost is that we charge upon the award of the contract and issue a performance bond and labor and materials bond.
Differences between Bid and Performance Surety Bonds
Understanding the difference between construction bid bonds and performance bonds is absolutely crucial to making the most out of your construction projects. Bid bonds and performance type bonds can have significant cost differences so when looking at the value of a bond it can be easy to be fooled when you don't consider the overall cost. The performance type generally include extra costs because much of the money is recouped if the contractor fails to actually complete a contract pursuant to the terms of that contract. With other types of bonds there is always a chance that a project might not be completed (or get changed enough that the bond is no longer valid) and you won't recoup the total cost of the bond that you've taken out.
What are the Requirements for the Bond?
These come with a guarantee from a special third-party guarantor, called the surety (usually an insurance company or a bank). This insurance policy ensures that the owner will end up getting some type of payment if the contractor fails to fully complete the construction contract as outlined in the bond. These types of bonds are not to be considered the same as fidelity bonds, instead the guarantor will have to recover the funds. This can mean that the owner may not be able to recoup the funds immediately, which can lead to extra costs and a longer waiting time to recoup the owner’s expenses.
How much does a performance bond cost? I need to build that into my bid
A bid bond is a cash deposit or guarantee that the winning bidder will have to submit after a contract has been won. Contracts can only begin when a bid has been created and a bid bond is submitted. They basically work to assure that if an individual bidder is successful with their bid on a construction contract, they will eventually be the one to execute the contract and provide all of the required security bonds. Bid bond penalties vary greatly from the cost of performance bonds and penalty usually involves paying back just 10% of the tender price. Many contractors prefer these types of bonds because they are far less costly and they don't tie up a lot of money or time with banks and other insurance institutions.
Understanding the differences between these two bonds can help you in any construction project and if you are interested in investing in construction or running your own construction business. Different contractors and construction companies will have different preferences when it comes to bonds so it's important to know potential customers going into any bidding process.
Bid Bond and Performance Bonds
Federal and state jobs make sure that the bidding companies have a bid bond prior to even allowing the bid. If the bidder is successful and wins the job, the next step is to be issued a performance bid and payment bond (sometimes known as a P&P bond).
A bid surety bond/bank guarantee is another name for a surety bond known as a bid bond. This bond is required for many governmental contracts and then the high bidder will be required to get a performance bond. A performance bond is usually given to a construction company when they need to be bonded for a surety bond job. In addition, a performance bond is usually granted in conjunction with payment bond. A performance bond is required for any governmental contract as dictated by the Miller Act. Most states have also passed statutes that require a performance and payment bonds in their own states and these laws are known as little miller acts.
The bid/bank guarantee bond shows that the bank is providing the suretyship on behalf of the bidding company. This guarantee has several benefits to the bidding company, such as allowing them to bid on multiple contracts at the same time without having to place large amounts of funds into escrow. Otherwise, significant cash flow is used up in the bidding process, which is better utilized in the actual performance of the jobs.
What is a contract bid bond?
For most occupations, including the likes of insurance agents, contractors, and any business that relates to bidding or labor forces, will require some type of surety bond. Even though there are many types of bonds available including, permit, licensing, contract bond, figuring out how all of these works, should give you a much better look at which bonds are going to be most effective for the business you own.
Contract Bonds are Three Party Agreements
Firstly, bonds are three way contracts made between the owner (known as the Obligee), the contractor (known as Principal) and the company doing the bonding (also known as Surety). The bonds are meant to signify the agreement that the contractor will perform the task promised to the owner, according to what's stated in the contract(s). If this ends up not happening, the surety company will be forced to compensate the owner for the contractor's damage.
See Our Individual State bond pages for more
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