As a surety-specific agency with a national footprint we numerous requests for “bid bonds” each day.  Contractors who have dealt with corporate sureties are aware of what these are however many new and smaller construction and commercial services contractors do not.  Because a bid bond seems to be very small, especially when compared with the underlying project total, contract surety applicants often do not understand why we request fairly in-depth information when reviewing a bid bond request.  The following description written by the NASBP in conjunction with the AGC is very helpful in understanding the bid bond obligation.

“A bid bond is provided as the basic instrument of prequalification. Prequalification in this context means that the surety has investigated the contractor sufficiently to be convinced that it can safely issue a bid bond on a given project. The bid bond states that the contractor will enter into a contract if the contractor’s bid is accepted, and the contractor will furnish whatever additional bonds (performance bonds and payment bonds) are required. If the contractor fails to do either, the bid bond specifies the amount, called the penalty, that may be paid as damages. The bid bond may be a forfeiture bond where the surety is liable for a fixed amount of the bond as expressed in dollars or as a percentage of the amount of the contractor’s bid regardless of the damages to the owner. Sureties are generally reluctant to issue forfeiture bonds as bid security. Usually the surety, under a bid bond, may be liable for the lower of the bid bond penalty or the difference between the contractor’s low bid and the contract price the owner must pay to the firm ultimately awarded the contract. In no event will the surety be liable for more than the penalty stipulated in the bond.”

So, a bid bond is essentially a guarantee that if the contractor “wins” the project, that surety WILL provide a performance bond, payment bond and/or maintenance bond.  As underwriters we must always assume that our contractor will submit a reasonable bid and be awarded the job.  So, we underwrite the project and the maximum amount of bonding that we foresee will be required.  We do NOT qualify a contractor for a bid bond.

National surety leaderSurety One, Inc. focuses on supporting the performance bonding needs of the commercial, highway, heavy industrial and construction contracting industries.  We offer performance bonds to construction and commercial service contractor applicants small and large. Visit, call (787) 333-0222 or (800) 373-2804, or email for a performance bond application package or information about any surety bonding need. Recuérde que le asesoramos en SU idioma, así que comuníquese con nosotros, SU compañía afianzadora preferida para la fianza.