A “Bid Security”, also known as a bid bond, is a form of guarantee provided by a bidder to demonstrate their commitment to a bidding process, particularly in construction or procurement projects. It is often required by project owners or clients to ensure that bidders do not withdraw their bids or fail to honor their obligations if they are awarded the contract.

Bid securities are typically issued by banks or insurance companies on behalf of the bidder. The amount of the bid security is usually a percentage of the bid price, commonly ranging from 5% to 10%. If the bidder wins the contract but fails to enter into a contract or provide the required performance or payment bonds, the bid security may be forfeited to the project owner as compensation for the additional costs incurred in selecting another bidder.

In essence, bid securities provide assurance to project owners that bidders are serious about their proposals and are financially capable of fulfilling the terms of the contract if awarded.