A bid bond is a secured document signed by a bidder for a construction work or alike jobs for the purpose of extending a guarantee to the project owner that the former will undertake the task on the job if chosen.
Everyone used to follow it as it is the easiest process. With an advent of technology, nowadays it goes digital or electronic. The exciting world of bid bonds allows the users to grab an opportunity to work on public jobs.
These are issued in the amount mentioned prior in the bid invitation. As the general specifications, a security equals to 10% to 20% of the bid amount is charged. And some contractors charge a pre-decided (fixed) value, regardless of the proposal amount.
No, the candidates are not required to show the same amount of cash to qualify for the bond. The selection is based on the total financial picture.
If you turn out to be a second or third bidder, your security is held till the contract is awarded so as the selected candidate has the option to transfer you the project as and when required or wished.
These instruments come with a contractor’s proposal at an acquisition time of a new project. It is a routine task on public work, such as local municipal contracts or federal state jobs. The process may also be used on private platforms at the discretion of contract proprietor.
The bond serves a guarantee that if awarded, the bidder will agree to the contract, and provides the required payment and performance bonds to commence with the work. The cost is usually free, but the surety is to be charged for them. The normal charges could be an annual bid bond service fee.
In case the bidder is not up to the desired mark as compared to next bidder or without a credible explanation, the surety can decline the final bond at any time resulting in a bid bond claim.
Apart from a bid bond, a bidder needs to present the security in the form of cashier’s check or irrevocable letter of credit, depending on the will of the project owner. The invitation defines the requirement of the proposals.
So here you have everything about the bid bonds. Let’s make it work great again. These instruments are a bit complex, but if executed properly and filed on time could be really helpful.
The crucial point is to review the written bonding requirements as discussed in the bid advertisement. Use the stipulated terms and crosscheck the document comprising the name, job description, project protocols and the right bid amount.
You’ll start loving bid bonds once you’re aware of each and every term related to it. For more information and expert advice, click here.