Bid bond
A bid bond (bid guarantee) is a surety's promise that a bidder will sign the contract and provide the required performance and payment bonds if it wins.
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Definition
A bid bond (bid guarantee) is a surety's promise that a bidder will sign the contract and provide the required performance and payment bonds if it wins. If the winner backs out, the buyer can claim on the bond.
On federal contracts that require one, the bid guarantee must be at least 20% of the bid price, capped at $3 million (FAR 28.101-2). State and local amounts vary; 5% or 10% is common, so read the bid documents.
How it differs
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vs. Performance and payment bonds
A bid bond covers the period until the contract is signed; a performance bond covers doing the work. What is Performance and payment bonds?
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Questions
What does "bid bond" mean in procurement?
A bid bond (bid guarantee) is a surety's promise that a bidder will sign the contract and provide the required performance and payment bonds if it wins. If the winner backs out, the buyer can claim on the bond.
What is the difference between Bid bond and Performance and payment bonds?
A bid bond covers the period until the contract is signed; a performance bond covers doing the work.