Purpose of Bid Bond

[Harley]

What is the purpose of a bid bond? and how does it work?

[marietta68]

Originally Posted by Harley

What is the purpose of a bid bond? and how does it work?

The bid bond demonstrates to the owner that you've been prequalified to do the work proposed - in terms of your experience and your finances. The bond amount is generally a percentage of your contract estimate. That amount is calculated to provide payment for damages to the owner if you fail to enter into the contract at the price submitted. The owner would then award the job to the second lowest, or qualified, bidder, taking the value of your bid bond to hopefully fully cover the difference.