If you’re looking to bid on a project or tender that requires a Bid Bond, you’ve come to the right place! We provide full contract bonding services to our clients for all types of projects. In order to obtain the ability to provide a bid bond, you’ll require what we call a bond facility. Learn more below and apply today!
Learn more about Bid Bonds...
What is a Bid Bond?
A Bid Bond is a financial instrument that guarantees a contract specific commitment to a project owner. Was that too wordy? Don’t worry! We’ll go over what a Bid Bond is, as well as when you may require one.
Bonding, in general, is similar to a qualification or recommendation process. A Bid Bond is one of these qualification processes that is asked for during the bidding or tender phase of a project. The bond document is submitted to a project owner, along with a tender or quote for a specific contract or job. This is used as a proof and commitment to the project owner that you can complete the specified contract for the stated amount. The most common amount or value of a Bid Bond is ten percent (10%) of the contract value / price being submitted, but other amounts may be provided as well.
Why do I need a Bid Bond?
Bid Bonds are required by many project owners at a part of their tender process. It is most common for contracts & jobs in excess of $50,000 and can be requested by both private and municipal project owners. The project owner is also called the “Obligee”.
From an owner’s (or obligee’s) perspective, requesting a Bid Bond while reviewing tenders will keep contractors from submitting frivolous bids. This is because the bond document creates an obligation to the owner to perform and complete the specified job. The Bid Bond is backed bay a surety company. Alternatively, if the submitting contractor is unable to complete the committed project for the tendered amount, the bond can be forfeit to the Obligee for the amount stated (usually 10%). This inability to perform is referred to as a “Default”.
How much does a Bid Bond cost?
The cost of a Bid Bond (or the ability to provide one) will depend on some specifics about your company. The Bid Bond itself does not cost anything or have a premium; however, the ability to provide a Bid Bond along with various other bonding documents is only possible once you have a “Bond Facility”. Think of a Bond Facility as an annual subscription to have the capability of providing bonds. Specifically, “Contract Bonds” (we go into this more below).
The cost of a Bond Facility – your annual subscription to provide bonds of various types – can vary depending on the financial standing of your business. Typically you are looking at somewhere between $1,500 and $5,000 annually to setup and maintain a Bond Facility.
What other types of bonds are available?
- Bid Bond
- Consent of Surety
- Performance Bond
- Labour & Material Payment Bond
- Maintenance Bond
- and more