What type of bond protects the owner that the contractor has submitted a bid in good faith?

A bid bond is specifically designed to protect the owner by ensuring that the contractor submits a bid in good faith. This type of bond guarantees that if the contractor wins the bid, they will enter into the contract and provide the necessary performance and payment bonds. If the contractor fails to honor their bid or does not proceed with the contract, the bid bond ensures that the owner can be compensated for the difference in cost if they need to choose another contractor. This mechanism provides reassurance to the owner that contractors are committed to their bids and helps to maintain the integrity of the bidding process.

In contrast, other types of bonds, such as performance bonds and payment bonds, are related to the actual execution of the contract rather than the bidding phase. An indemnity bond typically protects a party from certain losses or damages, while a license bond is often a requirement for contractors to obtain their licenses, ensuring they comply with specific laws and regulations. These other bonds do not specifically address the contractor's commitment to their bid.