What is a Washington bid bond?
Let’s say an obligee (usually a large general contractor, a government body, or an institution such as a school or church) wants to hire someone to do a project for them. They could request bids to see which contractors can provide the best price for the work they want to be done. If the obligee wants or needs a prequalification of bidder, and commitment that the bidders will honor their bid, they could require a bid bond, which is turned in with the bid. A bid bond guarantees that you will enter into a contract if you are the low successful bidder. The bond amount is typically 5%, 10%, or sometimes even 20% of the bid. Should you win a bid and accept the work via a contract, your performance and payment bond is issued to guarantee the contract and the bid bond is void because its obligation has been fulfilled. If you win, and reject the work or do not sign the contract and turn in Performance and Payment Bonds, you will owe the amount of the bond. This is to bridge the obligee’s cost gap between your bid and the second-lowest bidder.
What does a bid bond cost?
Most bonding companies don’t charge for a bid bond. If you win, the Performance and Payment Bond will be issued and that is when the premium is charged.
Who gets the bond?
The Contractor who has a Contract with the Obligee (general contractor or sub-contractor) is the one that secures the bond. The obligee is the owner of the contract and is the beneficiary and bondholder.
Getting a bid bond
The easiest way to get your bid bonds approved quickly is to maintain a strong relationship with your bonding company. This usually means keeping the underwriting file up to date with financial statements, work on hand reports, updates on open bonds, unbonded work, and any changes in the scope or location of your work. If you are an established account, you can manage that on our website.
When you are ready to start bidding on projects and move your business to larger contract work, please reach out to us, and Integrity Surety will walk you through the process. This usually means an application, business, and personal financial statements, a bank letter, and a work on hand report. Other items may be requested as needed. The purpose is to underwrite and prequalify your company and bonding capacity to the best of our ability.
If you have questions or want to get started with bid bonds, feel free to contact us. And to follow our company, visit our socials.
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