2017-11-29 00:00:00 Staying Competitive English Win more job bids and instill confidence in your next potential project owner by filing for a bid bond. https://d1bkf7psx818ah.cloudfront.net/wp-content/uploads/2017/12/08213800/contractor-prepares-project-bid.jpg What Is a Bid Bond?

What Is a Bid Bond?

1 min read

A bid bond is a guarantee that independent contractors give to project owners. It states that the contractor has all necessary resources to perform the job as expected and that compensation can be expected if the job is not performed to the project owner’s specifications. Essentially, it prevents the project owner from being held responsible if the contractor backs out.

Before bidding on a project, it’s critical that Canadian independent contractors know the law and understand their responsibilities. A bid bond helps to prevent contractors from making frivolous bids they can’t keep, because if they win the bid, the bid bond forces them to either take and complete the job or pay the bond premiums.

If the obligations laid out on the bid bond are not met, the contractor is liable to pay the bond amount. In most cases, the contractor who placed the unfulfilled bid is forced to pay the cost of selecting and awarding a new contractor, which is often 10 to 20 percent of the initial bid.

The cost of a bid bond varies depending on the size of the project, as well as the independent contractor’s creditworthiness and other financial credentials and history. Larger projects generally range from 1 to 3 percent of the total project cost.

Winning a bid can be difficult for contractors, but a bid bond can help to improve chances. Instead of setting your bid lower than the competition, consider using a bid bond to instill confidence in the project owner. Always be sure you can afford to provide all necessary financing and resources before you file for a bid bond.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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