Bid Bonds are often required by project developers. They require contractors and construction companies to have a bid bond before they can submit a bond for a specific project. These bonds help guarantee that the contractor or construction company has the means to complete the bid that was submitted.
These types of bonds are common in larger projects like mini-malls and other commercial projects. All government projects require a bid bond. Most private projects will require a bid bond as well. If the contractor or construction business cannot uphold the bid they submitted, the project developer can start a claim. The contractor or construction company then pays out on the bond. This payment can include the legal expenses that were procured during the claims process.
To avoid a claim, it is important to not underestimate costs and be sure to include all major expenses that will be required to perform the job. Contractors and construction companies should always budget for unexpected issues that may prevent them from completing the project. This way, they can successfully fulfill the terms of the bid and avoid any liability.
COST OF BID BONDS
Bid bonds typically cost between 5%-15% percent of the total bid price. The actual price varies from project to project. They will source the price from the related contract of the project.
HOW TO GET ONE
To get a Bid Bond, one must find a surety agency to produce one for you. You will need to submit information about the company and, in some cases, financial information to confirm the company or contractor can finance the project if they win the bid. The ideal surety bond agency can shop multiple marketplaces in order to find the best price on the bid. Safeline Surety Bonds is a bonding agency that checks all of those boxes.
Once the contractor or construction company has won the bid, they have now entered a contract under the Bid Bond. The contract outlines the project requirements that must be met. This is reiterated in the bid bond. If they can produce the contract, bid bond, and proof of insurance, the contractor or construction company will be granted a Bid Guarantee to start work on the project.