Surety bonds • Contract bonds
Bid Bonds: What They Guarantee, How Much They Cost, and How to Get One
A bid bond guarantees that a contractor who wins a bid will sign the contract at the bid price and provide the required performance and payment bonds. Project owners usually set the bond at 5% to 10% of the bid, and federal construction bids generally require at least 20%. Many sureties do not charge separately for bid bonds when a contractor has an established bonding program.
This guide covers what bid bonds guarantee, typical amounts, federal rules, cost, and how bid bonds connect to performance and payment bonds. Blake Insurance Group is an independent agency, and a licensed agent can help you set up bonding.
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What a bid bond guarantees
A bid bond assures the project owner that the bid was made in good faith and that, if selected, the contractor will enter the contract at the bid price and provide the required performance and payment bonds (NASBP). If the winning bidder backs out, the owner can make a claim, often for the difference between that bid and the next lowest bid, up to the bond amount. The contractor is responsible for repaying the surety under the indemnity agreement.
How much bid bond you need
The project owner sets the amount. Many private and public projects ask for 5% to 10% of the bid; for example, a $500,000 bid at 10% needs a $50,000 bid bond. On federal construction, FAR 28.101-2 requires a bid guarantee of at least 20% of the bid price, not to exceed $3 million.
How much a bid bond costs
According to NASBP, there is typically no direct charge for a bid bond; sureties provide them as part of a contractor’s bonding program, expecting to write the performance and payment bonds if the contractor wins. Some providers charge a small flat fee, often around $100, especially for smaller accounts. The real cost comes with the final bonds: performance and payment bonds commonly run about 0.5% to 3% of the contract amount. See our surety bond cost guide for details.
Federal and state bonding rules
For federal construction contracts over $150,000, FAR 28.102-1 requires performance and payment bonds under the Miller Act, so federal bids usually require a bid guarantee too. Many states and cities have their own "Little Miller Act" thresholds for public work, which vary widely. Check the bid documents for the required bond form and amount.
SBA help for small contractors
The SBA Surety Bond Guarantee program helps small businesses that cannot get bonding through normal channels. Since March 2024, it can guarantee bid, performance, and payment bonds on contracts up to $9 million, or up to $14 million on certain federal contracts. The SBA does not charge a fee on guaranteed bid bonds.
How to get a bid bond
- Gather financials. Sureties often ask for business and personal financial statements, a work-in-progress schedule, and references.
- Establish a bonding line. The surety sets single-job and aggregate limits.
- Request the bond for each bid with the bid documents and required form.
- Plan for final bonds. If you win, you will need performance and payment bonds.
Bid bond FAQs
How much is a bid bond?
Often there is no direct charge when you have a bonding line with a surety, though some providers charge a flat fee of around $100. You pay for the performance and payment bonds if you win.
What percentage is a bid bond?
Usually 5% to 10% of the bid on private and many public projects. Federal construction requires at least 20% of the bid price, up to $3 million.
What happens if I win and refuse the contract?
The owner can claim on the bid bond, often for the difference between your bid and the next bid, up to the bond amount, and you must repay the surety.
What is the difference between a bid bond and a performance bond?
A bid bond guarantees you will sign the contract and provide final bonds. A performance bond guarantees you will complete the work. See our bid bond vs. performance bond comparison.
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Tell us about your next bid, and a licensed agent will help you set up bonding.
