Contractors submitting competitive bids need construction bid bonds to show the owner that the bid is backed by surety support. Surety Bonds Agent works nationwide with fast, focused quote assistance. Request a construction bid bond quote today.
It’s easy with our simple 3-step process:
As the name suggests, bid bonds are surety bonds that are required from contractors bidding on certain construction projects. Choosing the right contractor for a large construction project can take a lot of time and effort, from putting together the RFP or RFQ, holding bidders’ conferences, reviewing and evaluating bid packages, putting together a contract, and so on. So it’s only natural that many project owners require bid bonds to ensure that:
Who Needs Them?
Purchasing a bid bond is a mandatory step in bidding on many large taxpayer-funded projects. Increasingly, private project owners are also requiring bid bonds, for the same reasons that public project owners do.
The required bond amount, also known as the bond’s “penal sum,” is determined by the project owner. This is the maximum amount that will be paid out on a valid claim.
How Do They Work?
A bid bond is a legally binding contract among three parties known as the “obligee,” the “principal,” and the “surety”:
If the principal violates any of the terms of the bid bond agreement, the obligee can file a claim against the bond and be compensated for the resulting financial loss, up to the bond’s full penal sum.
The principal is legally obligated to pay valid claims against the bid bond, and the surety guarantees that any claim the surety determines to be legitimate will be paid. Consequently, the surety typically pays a claim initially and is then reimbursed by the principal. That payment made on the principal’s behalf does not relieve the principal’s obligation; it merely shifts it from paying the claimant directly to repaying the surety.
If the winning bidder turns down the contract, the obligee will submit a claim against the bond to recover any financial loss that results from the contractor’s decision. A new RFP or bid solicitation may need to be created. And time is money in such matters.
Once a claim is filed, the surety will investigate to determine whether it is valid. The surety will pay any claim that it finds valid and will then seek repayment from the contractor.
The premium the principal will pay for a bid bond is a small percentage of the bond’s penal sum, that percentage being the premium rate. The surety decides what the premium rate will be after careful consideration of the risk involved in extending credit to the principal. The best measure of that risk is the principal’s personal credit score. A high credit score indicates a low risk that the principal won’t repay the surety for claims paid on the principal’s behalf, so the premium rate will be low. On the other hand, a low credit is a sign of higher risk to the surety, which warrants a higher premium rate.
With good credit, the premium rate for a bid bond could be as low as 1%, while someone with lesser credit could pay a premium rate as high as 15%.
We proudly serve all 50 states, offering a full range of surety bonds. To buy surety bonds online:
There’s no obligation, and we can often help you get bonded in 24 hours or less.
Select the bond you need — commercial, contract, or any specialized bond. We help you find exactly what is required in your state.
Complete a short online form. It only takes a few minutes, with no extra paperwork or long verification steps.
Get fast approval and receive your bond instantly by email. Your document is ready to use right away.
Simply fill out our convenient online application form to get started.
We work with a wide range of carriers to provide many options to our clients.
As an independent agency, we can leverage our carrier network to find the most competitive rates for the bonds you need.
We work to get you bonded as quickly as possible, often in 24 hours or less.
Our experienced surety bond agents provide personalized assistance to help you understand your bonding requirements and options.
Request an online quote today! Or speak with one of our knowledgeable surety bond agents about the commercial bonds you are interested in.
