A bid bond shows the project owner you're serious about your bid price and that you'll sign the contract if awarded. It's the first step in the bonding process for competitive tenders.
What is a bid bond?
A bid bond is a guarantee that if your bid is accepted, you'll enter into the contract at your bid price, subject to the tender terms. In Ontario it is commonly issued on the CCDC 220 form, typically for 10% of your tender price, together with an Agreement to Bond confirming the surety will provide the performance and labour and material bonds if you win.
A bid bond is a written guarantee submitted with your tender. It tells the owner that if your bid is accepted, you'll enter into the contract at the price you quoted.
If you back out after being awarded the contract, the owner can claim against the bond. This protects them from contractors who might submit unrealistic bids or change their minds.
Bid bonds are typically set at 10% of the contract value, but the specific percentage and terms vary by tender.
If you're awarded a contract but fail to sign it, the owner can claim against your bid bond. The claim is typically the difference between your bid and the next lowest bid, up to the bond amount.
This is why accurate estimating is critical. The bid bond ensures you stand behind your numbers.
Bid bonds are standard for most competitive tender processes.
Municipal, provincial, and federal contracts almost always require bid bonds.
Many private owners and general contractors require bonding on larger projects.
Any competitive bid process with strict tender conditions typically requires a bid bond.
Your bid bond is submitted with your tender package, showing you're serious.
The bid bond guarantees you'll sign the contract if awarded at your bid price.
If awarded, you enter the contract. The bid bond is then replaced with performance and L&M bonds if required.
Bid bonds are issued under an established bonding facility. Bonded clients send the tender documents, closing date and any bond wording to their Roughley surety contact well before the tender closes.
Bid bonds need a bonding facility first. Start with our surety request form and have your CPA-prepared financial statements handy. Please allow a week or more for a response.
Start Your Bonding RequestA bid bond is a guarantee that if your bid is accepted, you'll enter into the contract at your bid price, subject to the tender terms. It protects the owner from contractors who might submit unrealistic bids or back out.
Bid bonds are typically set at 10% of the contract value, though this varies by tender. If you fail to enter the contract after being awarded, the owner can claim against the bond for the difference between your bid and the next lowest bid, up to the bond amount.
Bid bonds are covered by your annual facility fee. There is no per-bond charge. Agreement to Bond letters are also included at no extra cost. The annual administration fee covers both bid bonds and Agreement to Bond letters for the duration of your facility.
As early as you can. We don't issue same-day or rush bid bonds. Bonded clients should send the tender details to their Roughley surety contact well before the closing date. Contractors new to Roughley need a bonding facility first, and our surety department needs a week or more to respond to new requests.
An Agreement to Bond (or Consent of Surety) is a letter issued alongside the bid bond confirming that the surety will provide the required performance and L&M bonds if you're awarded the project. Most tender packages require this. It's included at no extra charge with your bid bond.
Insurance transfers risk from the insured to the insurer. Surety is a guarantee. If a surety pays a claim, the contractor (principal) is required to reimburse the surety. That's why surety underwriting focuses on your financials and track record, similar to how a bank evaluates a loan.
Both provide financial guarantees, but a letter of credit ties up your bank credit and reduces your borrowing capacity. A surety bond preserves your working capital and credit lines. For most contractors, bonding is the better option because it doesn't restrict cash flow.
When you set up a bonding facility, the principal owners sign a General Agreement of Indemnity (GAI). This means you personally stand behind the surety's guarantee. It's standard in the industry and shows you have skin in the game.
Bid bonds and performance bonds serve different purposes at different stages of a construction project. Understanding the distinction, and how one leads to the other, is essential for any Ontario contractor pursuing public or bonded private work.
Construction bonds are mandatory on Ontario public contracts over $500,000, and increasingly common on private projects too. Here's what every contractor and project owner should know about bid bonds, performance bonds, labour & material payment bonds, and how to get bonded.
Surety bond premiums in Ontario typically range from 0.5% to 3% of the contract value for qualified contractors, plus an annual administration fee of $1,500 to $2,500. Here is what drives your rate and how to position yourself for the best pricing.
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Tell us about your company and your bonding needs. Please allow a week or more for a response.