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📋 Bid Bond Quick Facts
What Is a Bid Bond?
A bid bond is a type of surety bond that protects project owners during the bidding process
A bid bond is a financial guarantee that you, as a contractor, will honor your bid and enter into a contract if you’re awarded a project. It assures project owners that you’re serious about the work, financially stable, and capable of obtaining the required performance and payment bonds if you win.
Without a bid bond, your proposal will be automatically disqualified on most public projects and many private ones. Think of it as your “ticket to participate” in competitive bidding.
How Bid Bonds Work: Real Example
Let’s say you’re bidding on a $500,000 municipal project that requires a 10% bid bond:
- Your Bid: $500,000
- Required Bid Bond: $50,000 (10% of bid)
- Cost to You: $0 (bid bonds are free)
- What Happens If You Win: You must sign the contract and obtain performance/payment bonds
If you win but fail to execute the contract, the project owner can file a claim against your $50,000 bid bond. The surety will pay the owner the difference between your bid ($500,000) and the next lowest bid—let’s say $525,000. That’s a $25,000 claim you’ll have to repay.
The Three Parties in Every Bid Bond
Understanding who’s involved and their roles
The contractor purchasing the bid bond. You’re responsible for honoring your bid and entering into the contract if awarded. You’ll also need to obtain performance and payment bonds after winning.
The entity requiring the bid bond—typically a government agency, municipality, or private developer. They’re protected if you fail to execute the contract after winning the bid.
The insurance company that issues your bid bond and guarantees your commitment. If you default, they pay the claim to the owner and then seek repayment from you.
How Much Do Bid Bonds Cost?
Understanding the true cost of bid bonds and related surety bonds
What You Actually Pay For
Performance & Payment Bonds (if you win)
These are the bonds you’ll need to purchase after winning the contract. Pricing typically ranges from 0.5% to 3% of the contract value.
| Contract Size | Typical Rate | Example Cost |
|---|---|---|
| Under $500,000 | 2.5% – 3% | $250,000 contract = $6,250 – $7,500 |
| $500,000 – $2M | 1.5% – 2.5% | $1M contract = $15,000 – $25,000 |
| $2M – $10M | 1% – 2% | $5M contract = $50,000 – $100,000 |
| Over $10M | 0.5% – 1.5% | $15M contract = $75,000 – $225,000 |
What Affects Your Rate?
💳 Credit Score
Higher credit scores (700+) typically qualify for better rates. We work with scores as low as 600.
📊 Financial Strength
Strong balance sheets and positive cash flow lead to lower rates.
🏆 Experience
Proven track record on similar projects improves your rate.
📐 Project Size
Larger projects often have lower percentage rates on a sliding scale.
Bid Bond Calculator
Estimate your bid bond amount and potential performance bond cost
How to Get a Bid Bond: Step-by-Step Process
From application to approval in as little as a few hours
Fill out our simple online form with basic information about your company, the project you’re bidding on, and your bid amount. This takes about 5 minutes for most contractors.
Upload your bid documents (Invitation to Bid or Request for Proposal), project specifications, and any required bond forms. If the owner provides a specific bond form, we’ll use that. Otherwise, we’ll use a standard AIA A310 form.
- Bid specifications or RFP
- Project timeline
- Bid bond form (if provided by owner)
- Your estimated bid amount
Our underwriting team reviews your application. For small projects, this is typically just a credit check. For larger projects ($500K+), we’ll review:
- Business financial statements (last 3 years)
- Work-in-progress schedule
- Bank references
- List of completed projects
- Resumes of key personnel
Once approved (often within hours), we’ll email you a digital copy of your bid bond immediately. Physical bonds with original signatures can be shipped overnight if needed. Submit it with your bid and you’re done!
Most applications approved same day
Bid Bond vs. Performance Bond vs. Payment Bond
Understanding the three types of construction bonds
| Feature | Bid Bond | Performance Bond | Payment Bond |
|---|---|---|---|
| When Required | During bidding | After contract award | After contract award |
| Who It Protects | Project owner | Project owner | Subcontractors & suppliers |
| Guarantees | You’ll sign the contract if awarded | You’ll complete the project per contract terms | You’ll pay all subs and suppliers |
| Typical Amount | 5-20% of bid | 100% of contract value | 100% of contract value |
| Cost | $0 (Free) | 0.5-3% of contract | Included with performance bond |
| Duration | Until contract signing | Until project completion (+ warranty) | Until all payments made |
| Refundable | ✓ If not awarded | ✗ | ✗ |
| Federal Projects | ✓ Required | ✓ Required (Miller Act) | ✓ Required (Miller Act) |
Who Needs a Bid Bond?
Understanding bid bond requirements for different project types
Federal Projects
The Miller Act requires bid bonds for all federal construction projects over $150,000. These bonds are typically set at 20% of the bid amount.
Miller Act Requirements:
- Bid bond required to submit bid
- Performance bond required before work begins
- Payment bond required before work begins
- All bonds must be from an approved Treasury surety
State & Municipal Projects
Most states have “Little Miller Acts” that mirror federal requirements. Bid bond requirements vary by state and project size.
California
Required for public works over $25,000
Texas
Required for most public projects over $50,000
Florida
Required for state projects over $200,000
New York
Required for public works over $100,000
Private Projects
Bid bonds are optional for private construction but increasingly common, especially for:
- Large commercial developments
- Multi-family residential projects
- Industrial facilities
- Projects with institutional owners (universities, hospitals)
- Projects with lender requirements
Bid Bond Requirements by State
Click your state for specific requirements, thresholds, and regulations
Frequently Asked Questions
Everything you need to know about bid bonds
Free Resources & Downloads
Everything you need to prepare your bid bond application
Ready to Get Your Bid Bond?
Start your application now and get approved same day for most projects. No upfront cost for bid bonds.
Questions? Our bond specialists are available Monday-Friday, 8am-6pm EST