XL EagleBid bond (state and local) (Bid guarantee)
Bid bond (state and local) stands for Bid guarantee. A bid bond is a guarantee from a surety company that, if your bid is accepted, you will sign the contract and provide any required performance and payment bonds. If you back out, the agency can collect from the bond. The amount is usually a percentage of your bid, set in the solicitation.
State and local agencies mostly require bid bonds on construction and public works projects above a certain size. Some accept a cashier's check or certified check instead. Requirements and thresholds differ by state and even by city.
Why it matters to a small contractor
If you want public works jobs, set up a relationship with a surety agent before you need a bond. Getting bonded takes financial statements and time. A missing or wrong bid bond makes your bid non-responsive even if your price was lowest.
Example
A paving contractor wants to bid a town's parking lot resurfacing. The bid requires a bid bond of a set percentage. The contractor's surety agent issues it in a day because the contractor already has a bonding line in place.
Bid bond (state and local): common questions
Does a bid bond cost money?
Many sureties issue bid bonds at little or no charge to established clients, expecting to write the performance bond if you win. Ask your agent how they handle it.
Can I use a check instead of a bid bond?
Sometimes. Read the solicitation. If it allows a certified or cashier's check, the amount is usually returned after award.
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