Surety Bonds
Bid Bonds for Contractors — How They Work and What They Cost
Bid Bonds for Contractors — How They Work and What They Cost — everything contractors need to know about surety bonds.
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Everything You Need to Know Before Submitting a Bonded Bid
Surety bonds are a required part of doing business for most licensed contractors. Whether you need a license bond to operate legally, a bid bond to compete for public projects, or a performance bond to secure a major contract — Trade Safe helps contractors get bonded fast at competitive rates.
What a Bid Bond Does
A bid bond accompanies your proposal on a public or bonded private project. It guarantees that if you’re awarded the contract, you’ll (1) execute the contract and (2) provide the required performance and payment bonds. If you win but refuse to sign the contract or can’t provide the required bonds, the bid bond covers the owner’s re-bid costs.
Typical Bid Bond Amounts
Bid bonds are typically 5–10% of your bid price, or a flat dollar amount specified in the bid documents. A $1M bid with a 10% bid bond requirement means your bid bond’s penal sum is $100,000. The premium you pay for the bid bond is minimal — or free with an established surety relationship.
Cost of Bid Bonds
With an established surety that knows your qualifications: typically free or $100–$200 flat fee. Standalone bid bonds without a surety relationship: $200–$500. The real cost of a bid bond is establishing the surety relationship — which pays dividends when you need performance bonds.
Bid Bond as Proof of Surety Support
Submitting a bid bond signals to the project owner that a surety company has reviewed your qualifications and is willing to back you. It’s a credibility indicator — owners know that bond-backed contractors have been financially vetted by a professional underwriter.
What Happens If You Win and Can’t Perform
If you’re awarded the contract but can’t execute it — can’t get performance bonds, changed your mind, or underbid — the owner makes a claim on your bid bond. The surety pays the difference between your bid and the next responsible bid, up to the bid bond amount. The surety then recovers that amount from you.