What Is Bid Bond?
A bid bond is a surety bond that guarantees you will honour your bid and enter into the contract if you win. It protects the project owner if a contractor backs out after being awarded the job, and is commonly required to bid on public and larger private construction projects.
If a winning bidder backs out, the bid bond pays the owner the difference between that bid and the next-lowest qualified bid, up to the bond amount. A bid bond is usually the first step toward performance and labour & material payment bonds on the same project.
Frequently asked questions
What is a bid bond used for?
A bid bond guarantees that a contractor will enter into the contract at its bid price, and provide any required final bonds, if it is awarded the project. It lets owners screen out bidders who cannot follow through.
What is the usual bid bond amount?
A bid bond is typically set at 10% of the bid price, as specified in the tender documents. If the winning bidder backs out, the owner can recover the difference between that bid and the next-lowest compliant bid, up to the bond amount.
Do I need an Agreement to Bond with a bid bond?
Often, yes. Many Ontario tenders ask for both: the bid bond secures your bid, and the Agreement to Bond confirms the surety will issue the performance and labour and material payment bonds if you win.
Questions about Bid Bond?
Our Ontario brokers can explain how it applies to your policy.
Talk to a Roughley broker