Bid bond
Also called: bid guarantee, bid security, bid bond percentage, surety bond for bidding
A bid bond is a surety's guarantee, submitted with a bid, that the bidder will sign the contract and furnish the required performance and payment bonds if awarded; if the bidder backs out, the surety pays the government the difference up to the bond amount.
Federal rules are FAR 28.101, which requires a bid guarantee whenever performance and payment bonds will be required, with the amount set in the solicitation as a share of the bid price. The clause is FAR 52.228-1. State and local construction solicitations require bid bonds under the state procurement code or the Little Miller Act, usually on the same logic. A missing or defective bid bond makes a sealed bid nonresponsive under FAR 14.404-2 and most state codes, with no chance to fix it after opening.
What to check: the bond form the solicitation requires (federal work uses Standard Form 24), the surety's listing on Treasury Circular 570, the bond amount and whether a cashier's check is accepted instead, and the deadline for your surety to issue it. A new contractor needs a surety relationship before the first bid, which means financial statements and often the SBA Surety Bond Guarantee Program under 13 CFR Part 115.
What it is not: insurance for you. The surety expects to be repaid for anything it pays out.
See also: Performance and payment bonds, Miller Act, Invitation for Bid (IFB), Bid opening
Questions that use this term
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