At Pinnacle Surety, we offer a variety of different contract bonds to suit our client’s needs. As well as performance bonds and payment bonds, we’re also one of the leading suppliers of bid bonds. This is a specific type of contract bond, and there are various instances where one is required. So, as the experts on this matter, allow us to explain everything you need to know about bid bonds.
Call: (844) 612-7238
What is a Bid Bond?
A bid bond is an essential aspect of the contract bidding process when dealing with contractors and project owners. If you wish to bid on a job, then you must have a bid bond in place. It acts a guarantee that the bidder will enter into the contract if they are awarded the job. Furthermore, a bid bond also ensures that the contractor will find the correct payment and performance bonds to help support the contract, meaning they can carry it out to the best of their abilities.
Think of it as a safety net for project owners to ensure that contractors aren’t just bidding on jobs for the sake of it. From a contractors perspective, it proves you have the financial capacity to take on the job in question for the price quoted in the bid.
Why do you need a Bid Bond?
It was touched upon in the previous point, but contractors need a bid bond if they want to successfully bid on any type of contract-related job. In a lot of cases, you can’t even enter the bidding process without one. Therefore, you could miss out on a lot of potential jobs, which could hamper your progress as a company.
There are lots of instances where bid bonds are a legal requirement as well. This includes any jobs for state, federal, or local governments. When it comes to private contracts, then things are a little different as it all comes down to the project owner’s terms. But, in the vast majority of cases, they will stipulate that you need a bid bond to start bidding.
The bottom line is that most project owners will look at bid bonds as a way to filter out different contractors/bidders. It’s one of the easiest ways to distinguish if a company can actually carry out a job. If there’s no bid bond, then it shows that a contractor doesn’t have the experience or qualifications to do the work, so they immediately get filtered out from the rest. As such, if you don’t have a bid bond, then you will never be able to secure this type of contracted work!
How do Bid Bonds actually work?
You’ve seen why bid bonds are important, and you’ve got a brief description of what they are – but how exactly do they work?
As we’ve mentioned, this bond guarantees that you will proceed with a contract if you win the bid for it. Most bid bonds are around 10% of the quoted value of the project in question – but a lot of federal projects are closer to 20%. So, let’s say the contract is worth $1million, the bid bond amount will be $100,000. There is a fee for the bid bond as well, which is what we charge you when you apply for it. The cost depends on the size of the bond, but we’ll discuss this with you in great detail when you inquire about our service.
Essentially, if you fail to abide by the terms of the contract, you will have to pay the full value of the bid bond. So, if your bid gets accepted, but you then decide to raise your price so you get paid more, the project owner will be able to cancel your bid and give it to someone else. Now, this will mean having to give it to a lower bidder, which is why they claim the value of your bid bond as a penalty fee against you. It stops them from losing money when they accept a high bid then have to opt for a lower one because the contractor messed them about.
They can also claim the difference between your bid and the next bid – it often depends on which one is more valuable to them.
Why do you need to get Bid Bonds with Pinnacle?
We’ve established the importance of bid bonds for your company, so how do you get them? First of all, it’s essential that you get your bonds by a licensed surety insurance company. This company is an independent third party that oversees everything and can deal with any disputes from either party. At Pinnacle Surety, we’re here to ensure that everything runs smoothly and that you get the bid bonds you need to secure contracts and follow them through.
But, why choose us for all of your bid bond needs?
To put it simply, we take a lot of time and stress out of the entire process. Often, it can take days – maybe even months – for a surety company to approve your application and get you set up with the bid bond you need. But, at Pinnacle Surety, we make it quick and painless to get your bid bonds. It’s all thanks to our expedited process that offers fast turnaround speeds of 24 hours for all applicants. This means we can approve your bid bond within a day, meaning you’re not left waiting around for ages. As a result, you can quickly bid on contracts and get your foot in the door before the opportunity passes. A lot of contracts are extremely popular, meaning bids fly in very quickly, and the project owners accept them in no time. If you’re left waiting around for a bid bond, then you could miss your chance!
Furthermore, we also offer various subdivision bonds like performance/payment bonds. Therefore, you give the project owners more confidence that you can secure other bonds needed to carry out the project.