What Does A X% Bid Bond Mean?

Find out what it means when you are required to get a 5%, 10% or 20% bid bond for a public job you want to bid on.

Bid Bond Percentages Explained

If you're a contractor who wants to bid on a public project, you will likely need to get a bid bond in a specific percentage of the total estimated contract amount. The most common amounts required for bid bonds are between 5-10% of the total contract cost. This means if the project you're bidding on is estimated to cost $500,000 and you're required to get a 10% bid bond, you need to get a $50,000 bid bond.

Why Do You Need a Bid Bond?

The bid bond guarantees that if you bid on, win and then abandon a project before it starts, the surety company will pay the obligee for any costs associated with the bidding process. This often happens when a contractor underestimates the costs by missing a major expense for the job, and as a result is unable to get approved for the performance bond required to perform the work.

How Bid Bonds Work

While the bid bond amount you need will vary by the obligee and project, one thing remains the same; there are costs for the obligee to set up and execute a proper bidding process for a public job. The obligee has to employ architects and engineers to evaluate the bids from different contractors, organize pre-bid meetings to go over project specifics with contractors who have expressed interest in the project, and promote the actual bid date so there are plenty of contractors to choose from. The bid bond ensures the obligee isn't left out to dry if you decide to abandon the project.

What Do You Need to Get Bid Bonds?

There are several things all contractors need in order to bid on projects. There are industry standard forms that must be completed detailing the project regardless of what size the job is. However, larger jobs require a more in-depth review of your company information such as business financials. You can learn more about what you need for a bid bond request.


Eric is an industry expert that specializes in taking complex surety concepts and explaining them in terms that make sense to the general public. He also manages the JW Surety Bonds website and works with various partners to help further educate the public on suretyship using various mediums.

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