Contractor Bid Bonds are a guarantee put on bids in the contract process. When bids are awarded, contractor bid bonds make sure the business or person that put in that bid, can guarantee that bid price. This guarantee helps put security on a bid, as contractor bid bonds are required with contractor bids. Failure to enter into a contractor bid bond, even if you’re the highest bidder for a contract, negates your place, and security is relinquished.
Contractor Bid Bonds came into place to help bring some uniformity and reliability to the construction bid practice. Years ago, contractors would purposely underbid contracts, by presenting increasing low bids, to guarantee the contract be awarded to their business. After they were in contract, these contractors would find ways to increase the cost of the job, building up their profit line.
Nowadays, most large projects in California require bid bonds. Bid bonds also act as a way to prove the competency of the construction business; poor financials and shoddy businessman don’t take the time to bid bond if they’re going to be held accountable for increasing profit lines and revoking the contract. On the same lines, are also tied into bid bonds, because they are so closely related.
Additional Information on the Bidding Process
Prior to Opening Bidding, you may withdraw your bid and regain your security deposit. No problems retracting bid if bid is not awarded yet.
After the Opening Bid, you are contractually obligated to honor the bid, or you will incur a penalty (concede your security deposit). In very rare cases, you can try to prove an honest mistake in your bid, but there must be outlined evidence and not just negligence.
Contractor Bid Bonds can generally cost between 5%-20% of the full bid (typically they are in the 10% range). They use your credit score and financial information on the principal of the contract, to help speed along the bond application. The surety company requires financial insurance from the contractor placing the bid, in most cases.
Contractor Bid Bonds help bridge the gap between a successful business and an unsuccessful business. Rock 10 Insurance Services has your back when it comes to the confusion of the bidding process, and can walk you through all types of bonds. We’ll help you get to work in California, so you can focus on getting your bid right and getting more business. We know the bond markets like the back of our hands, and we’d love to share our experience with you. Contract Rock 10 Insurance Services to 866-376-2510 today, and remember we also offer Contractor General Liability quotes while you wait.