How many times it has happened that, in the extremely competitive work scenario, contractors bid extremely low for projects and then when chosen, find that it is not financially feasible and abdicate their responsibility, leaving the project owner in the lurch. This has made many project owners extremely cautious and wary of contractors.

Bid bonds are secured by the contractor prior to bidding for any construction or similar task as an assurance that he will undertake to do the task if his bid is accepted. The creation of the bid bond gives the business owner the requisite sureness and certainty that the contractor has the financial competence to accept and execute the project for the amount cited in the bid.

Bid bonds ease and expedite the bidding procedure of a project and ensure that it goes without any hitches. Without bid bonds, a project owner will be continually on tenterhooks, skeptical and worried if the contractor he chooses for his project can bring it to a successful conclusion without running into cash flow problems during the project

Not only does a bid bond enthuse a project owner with confidence it is also solid proof of your intent and ability to successfully comply with the bid contract and that you have thought out all aspects, before making the bid and that you are a responsible and practical person and can be trusted to do the job - it is a win-win situation for both.

A bid bond is assurance to the project owner that if the project fails, he can at least collect reimbursement and compensation for the surety bond.

However, what happens if the bid obligation is not met? In such a scenario, both the principal, that is the contractor and the surety are liable and accountable for the bond, together and individually. Moreover, the contractor will also have to face penalties for failure to conform to the bond's compulsions.

Not only will they have to compensate the project owner for the losses his incomplete project faces, they will also have to reimburse additional costs incurred in selecting and awarding the contract to a new person.

When a project owner sees that the contractor has requested a bid bond, he knows that the contractor will not be submitting a frivolous bid that he is not too serious about. A bid bond means that he will become duty-bound to do the job if he gets it, or at the very least it will cost him money by way of premiums. Failure to comply with bid-bond obligations could also result in legal wrangling and no contractor will ask for them, unless he is really keen on doing the project.

The importance of a bid bond can be gauged from the fact that all federal projects compulsorily require a bid-bond from the bidders and that in many regions such bonds are mandatory, if you want the pertinent licenses and permits.


Since the fidelity bond is insurance against the harmful acts of a 'specified person', the person seeking the bond must send, along with his application, a former offer of employment, detailed information about the employee in question, what he is expected to do, his starting date, his salary or wages and any other pertinent information. All this must be sent on the company's official letterhead.

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