Bid bonds are primarily used to protect the project owner (obligee) from financial loss in case the winning bidder fails to fulfill their obligations, such as declining to sign the contract or failing to provide the required performance and payment bonds.
Many public construction projects, particularly government contracts, require bidders to submit bid bonds as part of their bidding documents. The bid bond is typically a percentage of the bid amount, often ranging from 5% to 10%.
Sometimes for the issuance of the Bid bonds for the big tenders get issued by surety companies, which are third-party entities that specialize in providing surety bonds. The surety company assesses the financial strength and track record of the contractor before issuing the bid bond.
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