What is a Bid Bond?
In this tough economy, you need to get work to keep your business going.
I will let you in on a secret: One of the most often overlooked avenues of income is government work.
If you have been in business for a while and you keep hearing about people doing work that requires a bond.
You might think to yourself it is probably too much of a hassle to become bonded.
Bid Bond Definition
A Bid Bond is a type of surety bond, which guarantees that the bidder will accept the project and complete it according to it terms.This is generally not true. If you have a credit score of above 700 and have not filed for bankruptcy, you can probably get bonded for projects up to $400,000 with just your signature. The first step in the process of getting government work is obtaining a Bid Bond. By just spending 3 minutes of your time reading these few paragraphs can open the door to contrac-ting riches!!!
When most governmental entities or large general contractors issue a Request For Proposal (RFP) or Bid Solicitation there will be a section that says all bids must be submitted with a Bid Bond to be deemed responsive.
We do not charge for Bid-Bonds
Did You Know?
The Bid Bond amount usually request is 5% or 10% of the total amount of the bid. For Federal jobs, the amount of the bid bond is 20% of the total amount bid. If you fail to include a bid bond with you bid, your bid will be rejected. This means you wasted your time and money preparing the bid.
Why Do They Ask For A Bid Bond?
When project owners put a job out for bid, they want to make sure that the selected contractor can complete the project within the required time frame and has the financial ability to do so. Bid bonds provide assurance to project owners that the selected bidder is capable of taking on and completing the project. Without a bid bond, project owners have no way of knowing if a contractor is financially capable of handling the project.
This is especially important for projects with strict completion deadlines, such as a school roof replacement that needs to be completed before the start of the school year. By requiring a bid bond, the owner can have peace of mind that the bidder has been vetted by a third-party surety company.
But what if you have bad credit? Can you still obtain a bid bond? We’ll explore this question and more in this informative guide to bid bonds.
What Will Happen If The Obligation of the Bid Bond Is Not Met?
If the obligations of the bid bond are not met the contractor and surety are liable jointly for the penal sum listed on the bond. The amount of the penal sum on the Bid Bond is the percentage of the total contract price ie 5% or 10% that was requested by the owner in the RFP. The owner of the project can choose to make a claim on the bond to the Surety company if you fail to sign the contract and start work. The maximum amount of liability is the face value or the penal sum listed on the bond. The Surety will then collect the money paid out from you. This is why you need to be sure that your price estimates are accurate and you can complete the job within the time allotted.
How bid bonds work
When a bid bond requirement is made for a project it keeps contractors from submitting frivolous bids and helps project managers to feel secure with the contractor’s bid. Bond issuing companies do a full and comprehensive credit and financial review before they will provide a Bid Bond for any company.
Bond issuing companies do a full and comprehensive credit and financial review before they will provide a Bid Bond for any company.
It is important to point out that a surety company will not issue a bid unless they are willing to issue you a Payment and Performance bond if you get awarded the job. Also be aware that your bond limit is based on the full contract price you are bidding on, not the bid bond amount. For example, if you have a limit of $400,000, you could not bid a $500,000 job that required a 5% Bid Bond for $25,000. Your limit is always based on the full contract price.
Federal Bid bond Requirements
Under Federal law, all bidders are required to submit bid bonds for federal projects. Bid Bonds for federal jobs must meet the federal standards. You need to make sure they are Bonds issued by an approved corporate surety. The Department of the Treasury maintains a list of corporate sureties approved to issue bonds for federal projects, Treasury Department Circular 570.
Why Use FarmerBrown.com To Get Your Bid Bonds?
We have a greater understanding of the bonding process than most local agents. They may only write one or two bonds a year. Over 80% of our business comes from clients that were dissatisfied with their local agent. Keep in mind that once an application is submitted with wrong information it is almost impossible to change it. Do not go through the headaches of using inexperienced agents. It is your business and livelihood to use the best the first time around.
We do not charge for Bid Bonds.
We do not charge for Bid Bonds.
Fast Turn around times in most cases in less than 24 hours from submitting a complete application.
We Have Direct Access
We have direct access to underwriters to get you the bonds you need.
We Answer Fast
We are available to answer any questions or concerns you may have.
20 Years of Experience
Over 20 years experience in the Surety Industry.
These are the basics of bid bonds, but there is much more to know when setting them. If you have any questions, you can always contact us. One of the best ways to grow your business is to have the ability to bid the types of projects that require bonds.
Everything you need to know about Contractors Insurance is here.
What are the main advantages of choosing FarmerBrown.com for insurance quotes?
A Broader Choice
We work with more than 30 A-rated insurance companies, many of which your local brokers may not have access to.
5-Star Customer Service
We pride ourselves on our knowledgeable and professional sales team, who prioritize attention to detail and are prepared to handle complaints 24 hours a day.
We negotiate with the best insurers to achieve effective insurance solutions for you.