Bonding
Bid Bonds Explained
6 min read · Updated August 15, 2026
Quick answer
A bid bond is a surety bond that guarantees you'll stand behind your bid — if the government awards you the contract, you'll sign it and provide the required performance and payment bonds. It protects the agency from bidders who win and then walk away, and it's a routine requirement on public construction. In practice, being able to get a bid bond is really a signal that a surety is willing to back your company.
Key takeaways
- A bid bond guarantees you'll honor your bid and provide the required bonds if you win.
- The bond amount is usually a percentage of your bid (often 5–10%) or a fixed amount set by the solicitation.
- Bid bonds often carry no direct premium — they're the gateway to the performance/payment bonds that do.
- Back out after winning and the bond can be forfeited, and the surety recovers from you.
- You get bonded through a surety; build that relationship before you need it.
Why government projects require bid bonds
When a public agency puts a project out to bid, it needs confidence that the winning bidder will actually take the job and can be bonded to complete it. Without that assurance, a low bidder could win, discover they underpriced the work, and simply refuse — forcing the agency to re-bid and delay the project. The bid bond removes that risk: it makes walking away expensive, so only serious, bondable contractors submit.
How much a bid bond costs
Two numbers matter. The bond amount is the guarantee — typically a percentage of your bid, often 5% to 10%, or a fixed amount the solicitation specifies. The premium is what you pay the surety, and for bid bonds it's frequently zero, because the surety issues the bid bond as a step toward the performance and payment bonds that do carry a premium. The real "cost" of a bid bond is qualifying for it — convincing a surety to extend your company bonding capacity.
What happens if you back out
If you win and then refuse to sign the contract or can't provide the required bonds, the bid bond can be forfeited. The surety pays the agency the difference between your bid and the next acceptable bid, up to the bond amount — and then looks to recover that money from you under your indemnity agreement. This is exactly why accurate estimating matters: a bid you can't stand behind is worse than no bid.
How to get bonded
Bonding comes from a surety company, usually arranged through a surety bond agent. The surety underwrites your business — financials, credit, experience, and current backlog — to set how much bonding capacity you get. The best move for a contractor entering public work is to build a surety relationship before you need a bond, so capacity is ready when the right opportunity appears. Once you're set up, see how the next bonds work in our performance vs payment bonds guide.
Frequently asked questions
What is a bid bond?
What is a bid bond?
A bid bond is a surety bond that guarantees a contractor will honor its bid and, if awarded the contract, will sign it and provide the required performance and payment bonds. It protects the government from bidders who win and then back out or can't get bonded, forcing a costly re-bid.
How much does a bid bond cost?
How much does a bid bond cost?
Bid bonds are frequently issued at no direct premium by the surety, because they're a prerequisite to the performance and payment bonds that do carry a premium. The bond amount (the guarantee) is typically a percentage of your bid — often 5% to 10%, or sometimes a fixed amount set by the solicitation. What you're really being evaluated on is whether a surety will back you at all.
What happens if I win but don't sign the contract?
What happens if I win but don't sign the contract?
If you're awarded the contract and refuse to sign it or can't provide the required performance and payment bonds, the bid bond can be forfeited — the surety pays the government the difference between your bid and the next acceptable bid, up to the bond amount, and the surety will look to recover that from you. That's the whole point: it makes backing out expensive.
How do I get a bid bond?
How do I get a bid bond?
You get bonded through a surety company, usually via a surety bond agent or broker. The surety underwrites your business — reviewing your financials, credit, experience, and current workload — to decide how much bonding capacity to extend. Building a relationship with a surety early, before you need a bond for a specific bid, is one of the most important steps for a contractor entering public work.
Is a bid bond the same as a performance bond?
Is a bid bond the same as a performance bond?
No. A bid bond guarantees you'll honor your bid and provide the required bonds if you win. A performance bond, provided after award, guarantees you'll complete the work according to the contract. They're different bonds at different stages — see our guide to performance and payment bonds for how those work.
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