Why are Bid bonds better then posting cash?

[Gary]

I am new to public work and have never been bonded. I have bid on two jobs, but wasn't awarded either. I posted the cash for both bids. What are the advantages of getting a bid bond?

[Riskwriter]

Clearly the largest advantage to posting a bid bond instead of cash is simply knowing that you are pre-approved for the performance bond if you post a bid bond.
A bid bond is more or less, a promise from the surety, that should you be awarded the bid- and under normal conditions, that the performance bond is a given. Once awarded, and the bid spread is normal etc. the surety will then easily allow this issuance of the performance bond.

Posting cash only secures your bid, however, you may be in the dark as to weather or not you actually qualify for a performance bond.

Think of the bid bond as a pre-qualification process.

Lastly, keeping cash in your pocket is always a good thing!

[Surety Guy]

Also, the obligee keeps the cash you used for your bid if you can not obtain the performance bond or if you do not perform the job for whatever reason (ie calculation error on the bid).

The only reason I would ever advise a client to bid cash is if there isn't time to get the bid bond to the principal in time and I am positive the performance bond will be approved by surety.

In case somebody turn in a bid bond with a bid that is wrong for exemple, he made a mistake and he is short 100,000, and he dont want the job, what happen to the bid bond?