Bid Bond
A bid bond is used as security for bids submitted on a contract. Placing security on a bid guarantees that the bidder will execute the contract at the bid price, upon award of the bid. If security is not submitted with the bid, the bid is rejected. Additionally, if the winning bidder does not enter into a contract, the security is forfeited.
The Bid Bond also guarantees that the bonding company will provide a performance bond for the principal if awarded the contract. A claim can be filed if the bonding company refuses to place the performance bond. It is for this reason that bonding companies underwrite bid bonds with the same amount of scrutiny as if it were a performance bond. In short if the bonding company will not approve a performance bond, then they will reject the bid bond as well.
After years of lax underwriting, bonding companies have solidified their underwriting policies, allowing for very little risk. It is for this reason that no specialty programs are available for those with bad credit. In order to streamline the process, contract bonds valued at under $200,000 will be reviewed strictly using your credit report.
Bid Withdrawal
Before the Bid Opens
If the bid is withdrawn before bid opening, the bid security will be returned to the bidder. If the bidder is allowed to withdraw the bid before it is awarded, no action may be taken against the bid security or the bidder.
After the Bid OpensA successful bidder may not withdrawal their bid after the bid opens without penalty (forfeiture of security) unless the bidder can prove by "clear and convincing evidence" that a non-judgmental mistake was made in the original bid.
