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A bid bond is a type of contract bond. A bid bond offers a guarantee that when you submit a bid for a project that you are submitting an accurate bid and will later post a performance bond and/or payment bond. Bid bonds are generally used on public construction jobs and are considered financial security for contract bid proposals. Having in-house authority, Bonding Solutions has the ability tailor your bond program to fit the unique needs of your company.
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In most cases, there is no cost for a bid bond. A performance and/or payment bond follows a bid bond, once the bid has been won and contract awarded.
It is essential to include the cost of the performance and payment bond in your bid. If you are awarded the contract, there is a cost to a performance and payment bond. This cost can vary considering the project size, scope, financial qualification, experience, and other factors. Generally, expect to pay 0.5% to 3.0% of the total contract value.
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A Bid Bond is required because it guarantees that the contractor who wins the bid not only has the intent but the ability to complete the contract under the terms the parties agreed on. If the contractor doesn’t abide by the agreed-upon terms, the project owner can recoup the cost differential between the original and a secondary bid.