A “Bid Bond” is a type of surety bond used in the construction industry to guarantee that a bidder on a project will enter into a contract and provide the required performance and payment bonds if awarded the contract. It serves as a form of security for the project owner (obligee) in case the bidder (principal) fails to fulfill their obligations under the bid. If the bidder fails to honor their bid, the bond ensures that the project owner is compensated for the difference between the winning bid and the next highest bid, or for any additional costs incurred in re-tendering the project. Bid bonds are typically required as part of the bidding process for public construction projects to ensure that contractors are serious about their bids and have the financial capacity to undertake the project if awarded.
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