What is a Bid Bond How bid bonds work: Bid Bonds guarantee that the “obligee” will be paid the difference of A bid bond is a type of surety bond, which guarantees the principal’s tender price and the next closest tender price. This that the bidder will...
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What is a Bid Bond How bid bonds work: Bid Bonds guarantee that the “obligee” will be paid the difference of A bid bond is a type of surety bond, which guarantees the principal’s tender price and the next closest tender price. This that the bidder will accept the project and complete it action is only triggered if the principal is awarded the contract but according to its terms. fails to enter into the contract, as agreed, with the obligee. The It provides assurance to the project owner that the penalty on a bid bond is generally 5-10% of the tender price of the bidder has the expertise to finish the job once they are bidder. awarded. Contractors prefer these as they are less expensive than other The Bid Bond prequalifies the principal and provides options. Cash or bank credit lines are not locked up while the bidding the necessary security to the owner, or “obligee,” process is ongoing. guaranteeing that the principal will enter into the contract, if one wins the bid. General Contr
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