Contract Bid Bond – Why it Helps?

Businessby Mashum Mollah07 July 2017

Bid Bond

When bidding for a project, a contract bid bond adds an extra assurance to the owner of a project by guaranteeing the capacity and expertise of the bidder to complete the project. The bid bond is a fail-safe for the project owner in case something goes wrong and the successful bidder fails to execute. Through the surety provided by a contract bid bond, the owner of a failed project will get the compensation it entails. Simply put, the contract bid bond acts as insurance for the time and resources spent by a developer on a bid that fails to deliver on the promise. In order to have a better chance at getting the work, a contract bid bond is always recommended.

How Bid Bonds Work

A contract bid bond adds legitimacy to a bid and separates it from frivolous bids. If Person A were to win a contract but failed to eventually enter the said contract, the obligee will be awarded certain compensation which is equal to the difference between the concerned principal’s tender price and the nearest bidder’s tender price.

Advantages of Bid Bonds

Aside from the primary functions, there are many advantages of a contract bid bond, which make them a preferred choice for contractors. Bid bonds are relatively cheaper than other options for the same scenarios. Cash and bank credit lines do not get affected by bid bonds during a bidding process. Bid bonds reflect the qualified status of a contractor, since they enjoy the sanction of a surety company.

What can derail a Bid Bond Application?

There are many reasons a bid bond application can be rejected. The bond industry is focused on minimizing the risks and in case of a rejection, one can argue as to how the risk can be mitigated. Third party facilitators have the expertise to approach these situations and therefore provide the surest platform for getting contract bid bonds.

Negatives that Catch the Underwriter’s Attention

Companies that issue bid bonds will engage in a thorough investigation of the credit and financial capabilities of the contractor, including liabilities. Fraud and theft are major inconveniences if they show up in the past record. The argument would be to show how the current situation is a new page altogether from a business and personal perspective. Vices like gambling, alcohol and drugs have several degrees of impact on a bid bond underwriting process. Addictions are a death-knell but casual indulgences are usually passed off. Hard drugs are also another area of concern. Bad personal finances and extravagant lifestyles are alerting indicators of unreliability. Resume fraud and bad references also severely affect the chances of getting a bid bond activated. Social media is the latest playground for underwriters to look for important details of a contractor. Keeping it clean there is always suggested.

Bid Bond Costs

The cost for a contract bid bond is  usually a flat rate for smaller contracts but is calculated as a percentage of the total amount when the projects are larger. Align yourself with a proven and trusted contract bid bond facilitator and leverage the large network and industry expertise for a seamless process that gives you value for your money. Learn more and apply today.

Read More:


Mashum Mollah

Mashum Mollah is an entrepreneur, founder and CEO at Viacon, a digital marketing agency that drive visibility, engagement, and proven results. He blogs at

View All Post

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like