Bid Bonds

What Is A Bid Bond?

Bid bonds provide financial assurance to owners by guaranteeing that contractor bids are submitted in good faith. With a bid bond, a contractor enters into a contract at the amount bid and posts the appropriate performance bond. Owners use these bonds to pre-qualify contractors submitting proposals on contracts.

How Does a Bid Bond Work?

Bid bonds are put in place to help prevent contractors from submitting unsuitably low bids to win a contract. 

When contractors are needed to complete a construction job, a construction bidding process begins to find the best and most cost-effective contractor to assume the job. 

• Multiple contractors submit their estimated job competition cost to the owner in the form of a bid 
• The contractor who wins the bid is given a contract for the construction project 

A bid bond is needed to ensure that the contractor who wins the bid will honor bid terms after the contract is signed. If a contractor breaks bond terms, the owner must find another contractor. A bid bond compensates the owner for the cost difference between the contractors. 

Bid Bond Requirements

Surety bid bond requirements can be met in several ways:

• Bid bonds can be issued by an approved corporate surety agency
• Bid bonds can be issued by an individual surety that guarantees certain defined types of assets
• Individuals can act as sureties to satisfy bid bond requirements if they have sustainable assets to support the bond(s) 

Bid Withdrawal & Bid Security

If a bid is withdrawn before the bid is opened, the bid deposit is returned to the bidder. No action is taken against the bidder or bid security if a bidder is permitted to withdraw the bid before award.

Conversely, after bid opening without forfeiture of the bid deposit, a successful bidder may not withdraw the bid unless the bidder establishes by clear and convincing evidence that a nonjudgmental mistake was made in the bid. If withdrawal of a bid after bid opening is permitted, no action may be taken against the bidder or bid deposit.

What is a Letter of Bondability?

Whether it’s called a Good Guy Letter or a Sunshine Letters, these documents are evidence of a relationship between the contractor and a surety company. Depending on the surety, the letter might confirm the length of the relationship and could give information about the surety’s financial standing. A letter of bondability could provide general parameters on the limits of the type of bonding the contractor could qualify for from the surety.

However, the letter of bondability is not a prequalification for a specific job, nor does it make any promises about whether the contractor could be bonded for that job. If a project owner wants this information for a contractor, they should request that the contractor get a bid bond instead. Bid bonds are underwritten by the surety and provided only to those contractors who can be bonded for a specific job and amount.

Why Choose Brunswick Companies

Brunswick Companies’ surety bonding specialists guide clients in the construction industry through the process of obtaining a bid bond and other contract bonds.

Our clients receive:

• Fast, responsive and knowledgeable service
• Access to a wide selection of surety providers
• Competitive rates on all types of surety bonds
• Guidance through the process of obtaining surety insurance
• A proactive approach to improving your access to surety credit
• Assistance with specialized surety bonding needs

Great Rates on Performance Bonds

After you win the bid, working with an experienced surety broker provides an edge in obtaining the best pricing on performance and payment bonds. Mark Levinson, Senior Vice President of Surety, has developed strong relationships with the leading surety bond underwriters to provide our clients with access to more favorable terms and conditions. We work closely with our clients to increase their bonding capacity while staying in line with their expectations for corporate growth.