Surety Bonds

Bid bonds are used to guarantee that the Principal will enter into the contract and provide a Performance and/or Payment Bond if awarded the job. Bid Bonds are typically 5% or 10% of the  bid amount, and 20% in the case of federal contracts. Requiring a bid bond is a way for the Obligee (Owner) to weed out those contractors who cannot provide a performance and/or payment bond, which can save them time and money by not having to put jobs back out to bid. A surety will not issue a bid bond, even if it is small dollar amount, if they are not comfortable writing the performance and payment bond.