Bid Bonds
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 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.
What Happens If You Default?
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.
When Are Bid Bonds Required?
Bid bonds are standard for most competitive tender processes.
Public Sector Projects
Municipal, provincial, and federal contracts almost always require bid bonds.
Large Private Projects
Many private owners and general contractors require bonding on larger projects.
Formal Tender Processes
Any competitive bid process with strict tender conditions typically requires a bid bond.
How the Bid Bond Process Works
Submit Your Bid
Your bid bond is submitted with your tender package, showing you're serious.
Owner Reviews Bids
The bid bond guarantees you'll sign the contract if awarded at your bid price.
Contract Award
If awarded, you enter the contract. The bid bond is then replaced with performance and L&M bonds if required.
Same-Day Bid Bond Issuance
For contractors with an established facility, we can often issue bid bonds same-day. Our dedicated bonding department prioritizes turnaround so you never miss a tender deadline.
- Same-day turnaround for existing facilities
- Agreement to Bond letters included at no extra charge
- Bond wording review for complex tenders
Need a Bid Bond?
Forward your tender requirements to us and we'll take it from there. Include the tender documents, closing date, and any specific bond wording requirements.
Submit Bond RequestFrequently Asked Questions
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. It protects the owner from contractors who might submit unrealistic bids or back out.
How much does a bid bond cover?
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.
Is there a cost for each bid bond?
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.
How quickly can you issue a bid bond?
For contractors with an established facility, we can often issue bid bonds same-day. Our dedicated bonding department prioritizes turnaround so you never miss a tender deadline.
What's an Agreement to Bond?
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.
What's the difference between surety and insurance?
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.
What about surety vs. a letter of credit?
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.
What's an indemnity agreement?
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.
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Get your bid bond issued quickly so you can focus on winning the work.