Reducing Risk in Construction Bidding with Bid Bonds
Bid Bonds protect project owners if a winning bidder fails to sign the contract or provide required performance and payment bonds. They provide financial security when awarding potentially lucrative projects.
In a public bid process, the lowest qualified bidder wins the contract. But an under-capitalized contractor may later prove unable to complete the work. Bid Bonds let owners recover damages without paying twice if an awardee defaults.
The bidder obtains a Bid Bond that guarantees funds to compensate the owner for finding a new contractor if necessary. Bid, performance, and payment bonds are often required together to reduce an owner’s risk on a construction project.
To secure a Bid Bond, contractors work with surety companies that vet their qualifications and ability to perform if awarded. Providing coverage for reputable bidders is the surety’s business, mitigating an owner’s risk.
Bid Bonds are essential for contractors pursuing public contracts or private projects with an open bidding process. Bond requirements vary, but typically range from 5-10% of the total bid amount. Meeting these prerequisites makes a contractor eligible to bid and shows financial stability.
At Northwest Insurance Agency, we have in-depth expertise helping contractors navigate bid bonds and surety requirements. Let us match you with a program catered to your business needs for your next construction bid.