A Bid Guarantee (or Bid Bond) is a guarantee from a surety company whose role is to stand behind a contractor essentially stating their bid on a project is legitimate. Obligee – Project Owner, Principal – Contractor, Surety – Bonding Company. If a contractor is low bidder on a project and they decide to rescind their bid and cannot prove it was a clerical error, they are typically required by the contract documents to have their bonding company furnish the difference between their bid and the next highest bidder, protecting the owner from illegitimate bids or bidders. Bid Bond is commonly required to be part (Example 5% or 10%) or full amount of the bid. The full amount of the bid is most common. Power of Attorney from the bonding company is often submitted with the bid bond. Signatures of the Business’ principals and the company seal are often required on the document to make it valid. It is common for a Bid Guarantee to ‘convert’ to a Contract, Payment, or Performance Bond once the contract is executed. Also this bond will typically convert into a Maintenance Bond upon completion of the project as well, often for 1 year without changing the bond price.  The amount a bond will cost depends on the bid amount and a tiered table taking a certain percentage of each threshold dollar amount.

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