What is a Bid Bond and How Does my Colorado Company Obtain One?
Many contracts require bidders to supply a bid bond for the project. The bidders include general and sub contractors that are bidding on the particular job. The bid bonding process not only provides a penalty as outlined below but also guarantees that the bidder qualifies for the payment and performance bond if they are awarded the job. The bid bond guarantees that a payment and performance bond will be put in place if the bidder is awarded the job. Once they are awarded the job and the premium is collected the payment and performance bond will be in effect.
Most bid bonds require a 5 or 10% penalty but can go up to 20% if working with federally funded projects. The penalty would be triggered if the bidder was awarded the contract but backed out for a number of various reasons. The penalty would then be used by the owner to secure the next highest bid.
Typically there is not a premium for the bid bond since it’s not guaranteed that the bidder is awarded the job. Some companies do collect a fee for the bid bond but we have found these to be rare.
The underwriting for a bid bond is the same as a payment and performance bond. Companies will require an application to be filled out and likely financials and other items for approval. Once a bonding relationship has been established the requirements are not as stringent.
Please reach out to us to obtain bid bonds for your next bid.
Thank you for your consideration.
The Orcutt Group Team