Bid Bond Guide

Get a real-time quote in minutes.
Free Quotes In Minutes

Get a free quote online with a soft credit pull.

#1 Bond Writer

As the nation's largest volume bond producer, we negotiate the best rates.

100% Money Back Guarantee

Your bond will be accepted, or we’ll refund your payment in full.

What is a Bid Bond?

A bid bond is a guarantee that the bid you submit for a project (usually public construction jobs) is accurate and will post a performance bond. If your bid is inaccurate or you can't fulfill the obligations of your bid, a claim can be made against your bid bond which you’re responsible to pay.

It's important to keep in mind 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.

How Do Bid Bonds Work?

Bid bonds are submitted with your proposal to the obligee (the person or entity requiring the bond). If your bid is inaccurate, you win the project but back out of the job or cannot post a performance bond,a claim can be filed on your bond that you must pay, and you will likely lose the job.

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.

It's important to keep in mind 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.

Bid proposals without a valid bond included are rejected. If you are awarded the job, you usually will have to provide a performance bond to start the project. If you'd like to learn more about what surety bonds are and how they work, you can read our detailed guide here.

Requirements for Bid Bonds

What is The Required Bid Bond Amount?

You’ll likely need to get a bid surety bond that’s a specific percentage of the total estimated contract amount (most commonly about 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. Keep in mind, the bid bond amount you need will vary by each job and obligee.

Who Requires Bid Bonds?

Bid bonds are typically required by law for public jobs since taxpayer money and other federal, state or local money is used to fund the project. Most private jobs also require bid bonds to protect project and facility owners.

The Beginner's Guide to Bidding and Winning Public Jobs

We created a comprehensive guide which explains everything you must know in order to bid on and win projects. The topics covered in the e-book include:

  • The pros and cons of bidding on public construction projects
  • Bid solicitation procedures
  • What influences the bid process
  • How to bid on public projects
  • Surety bonds for bidding and construction
  • Why you need to understand bond claims
Beginner's Guide to Bidding and Winning

All You Need To Know About Surety Bonds!

This e-book was created with to help potential contractors navigate the process of bidding and winning public construction projects.

What Does a Bid Bond Cost?

Most bid bond providers charge a flat fee of $100 (our company provides them free of charge in most cases). If you want to see if you quality for bid bonds, please fill out our online application. You can learn more about surety bond costs and how they are determined by reading our comprehensive pricing guide. You can also take a look at our most frequently asked surety bond questions.

How to Get a Bid Bond

You’ll need to send your bond agency the bid invitation letter, bid request form and job specifications that you get from the obligee for all bid bond requests. Our company can provide you copies of the AIA bid bond form, as we have all industry standard forms on file. However, if the obligee has their own specific bond forms you’ll need to get the forms from them.

Check out our construction bonds guide where you’ll find every bond you need to work on public projects. However, you need to provide more than just the items listed above when requesting bid bonds for larger projects.

What is the Difference Between a Bid Bond and a Performance Bond?

Bid bonds are needed before you obtain a performance bond, as they guarantee that your bid is accurate, and that the surety will provide you a performance bond if you are awarded the job. Conversely, performance bonds are needed to perform work on the awarded job, and guarantee you will do so according to the contract in place.

You can learn more about how bid and performance bonds work and what you’ll need in order to get both bonds. You can also take a look at the other contractor bonds that can be required for public jobs.

It's important to note that contractor license bonds are different from performance and payment bonds (but often confused with them), and are required to obtain a license rather than work on public projects.

More Items Are Needed for Big Projects

If you want to bid on projects that are over $350K, you'll need to provide more than just the bid request form and job specifications. Larger contracts are based on more than your personal credit, as the surety company will also request and review your business financials and industry experience.

All of this information is required and used to get an idea of whether your company is able to handle the larger project you want to bid on, so make sure you provide the most accurate information possible to present your business as capable to get the job done. Using a construction CPA is highly recommended to present your company in the best light possible and give you the highest chance for approval.

As mentioned above, the required bid request form asks for contract details such as the job cost breakdown, which includes profit, materials, labor, subcontractors and overhead. Presenting these details can be confusing and difficult when trying to record in a paper system.

That's where construction bid software comes in; it can be used to estimate your contract costs and view and manage your company's most important metrics. Harnessing the power of software will give you a better chance at winning the projects you want.

Construction Bid Bond Claims Can Put You at Risk

You are responsible to pay bond claims in full, which can be as large as the full bond amount (including legal costs). The indemnity agreement you must sign to get your bid bond is a legal contract that pledges your corporate and personal assets in the event of bond claims. Watch our video for an easy to understand explanation of how bond claims work.

Unfortunately, most bond agencies won’t take the time to explain how claims can put you at risk and how to avoid them; if this happens when working with a bond agent, it should be a big red flag to reconsider doing business with them. Your bond agency should be your first line of defense against bond claims. You can also learn how to find the right bid bond companies for you.

How to Avoid Bond Claims

Ensure that the bids you submit are accurate and obtain performance bonds when you are awarded contracts to avoid claims on your construction bid bonds. As mentioned above, you are responsible to pay for any bond claims that you cause, which can be as high as the face value of your bond.

If claims do occur, find out how our company can save you money on them. If you need help understanding exactly what your bond guarantees you will and won’t do, please contact a bond professional.

Can You Get Bid Bonds Without Performance Bonds?

Simply put, probably not. Most surety companies won't provide you bid bonds for projects that leave out performance bond requirements because there is more risk involved without having performance bonding to ensure projects will be completed properly. Bid, performance and payment bonds are almost always required by law for public jobs.

Why? These bonds are protection for the public because they guarantee that your bid will be accurate, that you'll complete the work properly and that you'll pay any subcontractors or suppliers according to the contract. Please be advised, there are times when job owners don't require performance bonds, and there are downfalls that come along with leaving the bond requirements out.

3 Reasons Jobs Without Performance Bonds Are Risky

1: Subs and Suppliers Aren't Protected

When public contracts are bonded with performance and payment bonds, the laborers, subcontractors and suppliers are protected because the bonds ensure they will get paid. If no performance and payment bonds are required, the subs and suppliers have no way of getting paid if the contractor defaults or goes bankrupt.

Keep in mind, if a contractor bids on and wins several public contracts without performance and payment bonding requirements and goes bankrupt, all of the subs and suppliers on each of these jobs will be left unpaid.

2: Less Growth for Your Business

The surety company is one of your greatest allies when bidding on public projects, as they will work with you to help you meet the various requirements to get bonded and pair you with jobs that you can reasonably handle. Both of these will result in helping grow your business.

It benefits both you and the surety company to build a strong relationship because it allows you to build your experience and track record for future projects, while the surety company benefits by having a business that consistently wins projects and needs bonding.

Even if some jobs don't require payment and performance bonds, you will need to get bonded eventually since the majority of public projects do require the bonds. The longer a small contractor waits to get bonded, the harder it will be since there won't be a track record of meeting the necessary requirements for bonding and performing bonded work.

3: Waiving Performance Bonds Puts Taxpayers at Risk

As mentioned above, payment and performance bonds protect the public. If a contractor defaults on a job that isn't bonded with performance and payment bonds, the taxpayers will end up paying for an entirely new contractor to come in and complete the job.

On the flip side, if a contractor defaults on a bonded project, a claim can be filed on the performance bond to pay for a new contractor to get the job done.

Construction Jobs We've Bonded

Our company has bonded thousands of construction projects over the years. You can take a look at some of our most notable bonded projects here.

Contractor Insurance

There are several types of insurance coverages that are recommended for contractors, but the recommended coverage will vary based on your operation.

If you’d like to learn more about all of the insurance coverages available to you, please read our contractor insurance guide.

Frequently Asked Questions

You can apply on our website and find out if you qualify, but not everyone does. Approvals for smaller contractors are based strictly on the owner's personal credit. For larger contractors, credit strength, experience, the type of work being performed and financial strength is all considered.

A bid bond guarantees your bid is accurate and that you will provide a performance bond if you are awarded the job. A performance bond guarantees you will not default on the contract, and that all work will be performed properly.

Usually no, they are separate. However, in Ohio bid bonds automatically become performance bonds if you are awarded the contract.

It is possible. However, not everyone qualifies. Smaller contracts, about $400K and under, are underwritten on personal credit of the owners. It is possible to qualify with minor credit issues; however, there are no bad credit markets available for people with major credit problems.

Yes. However, your credit must be acceptable and you will be limited to smaller bonds unless you have extensive industry experience and a good amount of equity within the company. You can apply online to see if you qualify for bonding.

It is your pre-approved bond limits. Bond lines include single and aggregate limits. The single limit is the largest bond you can get for one specific job. The aggregate limit is the total amount of bonded work on hand you can have at once.

Your marriage legally joined your assets with your spouse, and the surety will require you to personally guarantee to reimburse them in the event of a valid claim. Your spouse will also have to personally guarantee on your behalf to ensure they are on board with pledging your shared assets. Bonding companies also use spousal indemnification to get an indication of your character. If your spouse will not guarantee you, neither will they.

Work with a construction CPA to ensure your financial statements are properly prepared and presented to qualify for larger contracts.

You must contact us immediately, as we have a team of claim specialists here to find a resolution for you. Keep in mind, it is crucial that you work with an expert in the surety industry. Learn more about how to ensure you choose the proper bond company.

You can take a look at our full list of contract bonds.

From Our Customers
JW Surety Bonds widget logo

Ready to Get Started?

Get a real-time quote today. You’ll be bonded in minutes, not days!