What is a bid bond?
Bid bonds are sometimes a necessity for contractors who apply for government jobs. Though the practice is not necessary for private jobs or projects with other private companies, there are some companies that require a bid bond before you can start your projects, even if it’s just a simple home remodel. And like most things governmental, it can be overly complicated and difficult to navigate.
Why are bid bonds used?
Bid bonds are issued by an insurance company and can be used to guarantee a number of different types of agreements. In general, though, a bid bond is used to guarantee that an individual or company will complete specific work for a set price. They work to keep the bidding process honest, ensuring that no one will raise their prices once they have been selected to do the work.
Who needs to be bonded?
All bidders on federal contracts worth $25,000 or more are required to submit bid bonds. This pertains to both subcontractors and suppliers, as well as main contractors. The Miller Act is a law that requires all contractors and subcontractors working on federal projects to submit a bid bond as a guarantee that they will complete the project.
So how do you get one?
The first step is to talk with your broker and decide how much coverage you need. Typically, your broker can offer this information right away, but sometimes it may take more than one conversation before the amount of coverage makes sense for your company. Don’t rush into it — this is an important decision.
Use Bid Bonds when you find yourself as the most responsive bidder
So, in the end, Bid Bonds serve two purposes: they ensure that your bid remains valid and they give you the confidence to bid higher. For both small and large jobs, trusting Bid Bonds can be just as important as securing that contract. If you are a contractor and need a policy, give us a call! We will make sure you don’t leave money on the table.