What is a Bid Bond typically used for?

A Bid Bond is a type of surety bond that a contractor or bidder submits along with their proposal to ensure that they will honor the terms of their bid if selected for the contract. The primary purpose of a Bid Bond is to provide a guarantee to the project owner that the bidder will enter into the contract and commence work if awarded the project. If the bidder fails to do so, the project owner can claim the bond amount as compensation for the additional costs incurred in selecting another contractor.

This function is essential in the bidding process, as it helps protect the project owner from the risk of bidders who may not have the intent or capability to follow through on their proposal after winning the contract. Such protection is crucial in ensuring that the project can proceed without significant delays or financial loss in the event that a contractor backs out of their commitment.