Chances Bonding Services

Bid Bond

This article will help you understand what a bid bond, why you need it and how to apply for a one.

What is a Bid Bond?
When a contractor submits a bid for a project or work, a bid bond (the surety bond) is used to guarantee that, if selected, the contractor will complete their work in the allotted time and budget.

Each bid bond involves the following three parties:
Principal: They are the contractor obtaining a bond to ensure financial integrity.
Obligee: They are the project owners or developers who request the bond.
Surety: They are an underwriter who offers a bond to ensure that the obligee can fulfil the contract if awarded.

Who Needs a Bid Bond?
Many different types of businesses want bid bonds. The most popular are construction firms. Types of contractors who require bid bonds:

  • General Contractors
  • Mechanical and Electrical Contractors
  • Road Paving Contractors

    Types of Public Owners who require bid bonds:

  • School Boards
  • Ministry of Transportation
  • Public Works
  • Hospitals

How Bid Bonds Work?

A bid bond is a specific type of three-party financial contract in which the obligee requests that the principal secure a bond, usually with a surety, which is often insurance. A bid bond assures the developer that if the principal gets the job, it will fulfil the contract provisions, including the acquisition of other necessary bonds, including a performance bond and a payment bond.

Process to Apply for a Bid Bond

Qualifying for the bond you need for a specific project is the first step in applying for a bid bond. Next, you will need pay a bid bond amount, and provide credit history.
After reviewing the financial data, approving the application and receiving payment, your underwriter will issue a bid bond.

A contractor needs a surety facility to obtain a bid bond. If you are considering submitting a bid for a public project in Virginia, Maryland, you can contact us to find out how we can help arrange this for your company.