What are Bid Bonds?
A bid bond gives a guarantee that the bid that has been submitted for a project is accurate. If you are the highest bidder, you win the project and must take the job because there are consequences if you back out of a job. A claim can be made against the owner which you are responsible for paying.
What does a bid bond cost?
Bid bonds cost differ depending how big the contract, for example for smaller contracts within 350k and under usually cost around $100 each or $250 for unlimited bonds for the year. For larger contracts meaning 350K and over are free of charge. To get a proper quote, you must visit our website and fill out our application.
Where can you get bid bonds?
Surety Kings provides you with all the bond forms as every industry standard forms. If the obligee requires their specific bond forms, you must get the forms from them.
How do Bid Bonds work?
Bid bonds are submitted to the obligee with your submission. If your bid is inaccurate, a claim could be filed against you which you must pay, and you will most likely lose the job. Without valid bonds, the bid proposals are rejected. If you are awarded the job, you must accept the job and provide a performance bond to start with the project. The bid bond guarantees that the obligee will pay the difference between the tender price and the second highest bidder. This only happens if the principle fails to enter the contract as agreed by the obligee. Contractors like using bid bonds as they are not expensive and provides assurance to the owner. Another reason why contractors and owners like using bid bond are that it gives an idea that the bidding contractor is supported by the financial backing of a surety company and they are qualified enough to complete the project.
The owner should tell all the bidders a bid bond before making any bids because it provides assurance to him/her that he will complete the job. Suppose you want to bid $150,000 on a job, and you are the highest bidder, which means you must take the job you selected. If you back out there could be a claim, and you must pay the difference in your bid with the second highest bidder.
Bid Bonds & Performance Bonds work Together:
The first thing to bid on a project or a public job you must be able to get a bid bond, which means that the bid you submit is accurate and that the surety company will then write a performance once you are awarded the job. Once you get assigned the job, you must get a performance bond which guarantees that you will finish the work and not leave it unattended.
How to get a Bid Bond?
First, you will need to send a bid invitation letter to your bond agency, with the bid bond request form and the job specification that you get from the obligee for all the bid bond claims. You will also be needed to provide personal financial, companies financials and other info which will help get a better rate. Credit is also looked over because if you have been awarded the job, you must have enough money to accept the position and also be able to pay the co-workers, contractors, and other staff.
Construction Bid Bonds claims can put you at risk
You are responsible for paying the claims of the bond fully, which could be the full amount of the bond which includes the legal costs. The agreement which you must sign to get your bond bid legal which pledges your corporate and personal assets in an event of a bond claim. Most bond agencies will not have enough time to explain all about the claims and how it puts you at risk and how to avoid them. If anything like this working with a bond agent, reconsider doing business with them. The bond agency should be contacted first against the bond claims.
How to avoid bond claims
Make sure that the bids you have submitted are accurate and obtain performance bond once you have been awarded the contract to prevent a complaint. As mentioned above that you are responsible for paying for any bond claims that you cause, which could be very high depending on the bond. If claims do occur, find out our company and how it can help you in these situations. If you need help understanding what your bond guarantees, don’t hesitate and contact a bond professional.
Before filing a bid bond and issue your bid, which will automatically guarantee that the underwriter will agree to file a performance bond if your bid is accepted. There is some information that Is needed which should be compiled when applying for a bid bond.
Typical questions asked on a bond bid application:
1. The quantity of your bond
2. What is the date of the bond
3. History of being bonded
4. The history of your company with its financials
5. Current, personal credit score
Bid Bonds help the selection of specific jobs and projects to run smoothly. The most important thing is that they provide owners in the way of assurance that the bidder will select the position and appropriately complete without any problems such as cash flow. Without this bonds, the owner would be worried if the bidder would finish the job correctly or leave it unattended.
Cost: Bid Bond Premiums:
Contractors pay surety agency a premium which secures a bid bond for them. Bid bonds cost vary due to many factors such as the bid amount, contract terms and other conditions mentioned above. Usually, bid bonds premiums are within 1%-5% of the sum. Before preparing for a bid, make sure that that the project requires a bid bond and if it does, what is the price of the bond. This will help you determine the price that you will pay to secure the bond.