989 East South Boulevard
The Bid Bond is the first bond needed in the surety process. It is the financial assurance that a bid has been submitted in good faith. The good faith references the contractor's intentions of entering into a contract and supply performance and payment bonds. Bid bonds are required on most construction projects and are typically issued for 5-10% of a contractor's bid proposal. Bid bonds protect project owners, also known as Obligee's, from the cost difference between the low contractor’s bid and the next lowest bidder.
Local, State, and Federal governments require bid bonds as a tool to prequalify construction companies. Surety companies prequalify contractors for surety capacity, which reduces the need for governments to prequalify contractors. A contractor who can submit a bid bond with their proposal, proves to a project owner that they have the experience, capital, and financial wherewithal to complete the project. By obtaining a bid bond, project owners are able to limit the potential bidders to firms who have already been vetted and underwritten by a surety company.