Process
What is a bid bond?
A bid bond is a surety instrument submitted with a bid that guarantees the bidder will honour its price and, if awarded, will sign the contract and provide the required performance and payment bonds. If the winning bidder backs out, the surety pays the government's damages up to the bond amount — typically 5-10% of the bid price.
Last updated: 2026-06-12
How bid bonds work
A surety company underwrites your firm — financial statements, work history, capacity — and issues the bond for a specific bid. Submitting the bond tells the buyer a professional underwriter has judged you capable of performing at your price.
If you win and proceed normally, the bid bond simply expires. If you refuse to sign or cannot deliver the follow-on bonds, the surety covers the owner's cost of going to the next bidder, then recovers that amount from you under your indemnity agreement.
Where bid bonds are required
Construction and public works solicitations are the heartland: US federal construction over the simplified acquisition threshold requires bid guarantees under the Miller Act framework, and Canadian federal, provincial, and municipal construction tenders commonly demand bid security of 5-10%.
Goods and services solicitations require them less often, sometimes accepting alternatives such as certified cheques, letters of credit, or bid deposits. The solicitation states the exact form and amount — match it precisely, because a deficient bond makes the whole bid non-responsive.
Cost and qualifying
Bid bonds themselves are cheap — often free or a nominal fee within an established surety relationship, since the surety's real exposure begins with the performance bond. The effort is in qualifying: expect to provide financials, references, and personal indemnities, especially as a newer firm.
Small contractors in the US can access surety support through the SBA's Surety Bond Guarantee program; in Canada, surety brokers and some provincial programs serve the same role for emerging contractors.
| Bond | Protects against | Typical amount |
|---|---|---|
| Bid bond | Winner refusing to sign or bond the contract | 5-10% of bid price |
| Performance bond | Contractor failing to complete the work | Often 50-100% of contract value |
| Payment (labour & material) bond | Subs and suppliers going unpaid | Often 50-100% of contract value |
Frequently asked questions
- How much does a bid bond cost?
- Usually nothing or a small flat fee once a surety has prequalified your firm — the surety prices its real risk into the performance bond that follows an award.
- What happens to my bid bond if I lose?
- Nothing — it lapses with no cost beyond any issuance fee. Bonds of unsuccessful bidders are released or simply expire after award.
- Is a bid bond the same as a performance bond?
- No. The bid bond guarantees you will enter the contract if you win; the performance bond, posted after award, guarantees you will actually complete the work.
- Can I bid without a bond if the tender requires one?
- No. A required bid bond is a mandatory responsiveness item — a missing or deficient bond disqualifies the bid regardless of price.
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Related answers
This article explains government procurement concepts in general terms and is not legal advice. Rely on the specific solicitation documents for any opportunity you pursue.