What is the purpose of a Bid Bond?

The purpose of a Bid Bond is to ensure that the builder or contractor commits to performing the work for the bid price they have submitted. This financial security protects the project owner from financial loss if the contractor fails to honor their bid. Specifically, if the contractor wins the bid but does not proceed with the project as quoted, the Bid Bond can provide compensation to the project owner for the difference in cost incurred when hiring another contractor to complete the job at potentially a higher price.

This mechanism helps to maintain integrity in the bidding process, ensuring that contractors put forth serious bids and do not simply submit low proposals intending to renegotiate later. A Bid Bond ultimately serves to reinforce trust and financial accountability among parties involved in construction projects.