How to Get a Bid Bond: A Step-by-Step Guide for Contractors

What Is a Bid Bond?

A bid bond is a guarantee to the project owner that if you win the contract, you'll sign it and follow through on your obligations. It protects the owner from contractors who bid low, win, and then back out. Bid bonds are required on most public construction solicitations — federal, state, and local. The requirement is in the solicitation documents. If a bid bond is required and you don't submit one, your bid will be rejected.

Step 1 — Find a Surety Bond Producer

A surety bond producer is the intermediary between you and the insurance company that backs the bond. You don't go directly to a carrier — you go through a licensed producer who packages your application and submits it on your behalf.

Choosing a producer who works with multiple carriers matters. If your producer only has a relationship with one surety company, you're getting one offer. A producer who shops multiple carriers can find you a better rate and is more likely to get your application approved.

Step 2 — Set Up Your Bond Program

Before your producer can issue a bid bond, a surety carrier has to approve you for a bond line. This is a standing authorization to issue bonds on your behalf up to a total aggregate limit. Getting your first bond line requires more documentation than a renewal. The carrier wants to understand your financial position and your capacity to perform the work. Here's what you'll typically need to provide:

• Business financials — Two to three years of company financial statements — balance sheet and income statement.
• Personal financial statement — Surety carriers look at the personal financial strength of business owners, especially for smaller companies.
• Work-in-progress schedule — A current list of your active projects: contract values, percent complete, estimated cost to complete.
• Bank reference — Your business banking relationship — average balance, line of credit if you have one.
• Résumés for key principals — Relevant construction experience for the people running the company.

Step 3 — Submit Your Application

Your producer will package your documents and submit them to one or more surety carriers. The carrier's underwriting team reviews your file and decides whether to approve a bond line and at what aggregate limit.

For first-time applicants, this process takes longer than for established contractors. Plan for one to two weeks from document submission to approval. If you have a bid deadline, start early.

Step 4 — Bid Bond Issuance

Once your bond line is in place, getting a bid bond for a specific project is fast. Your producer needs:

• The project name and owner
• Your bid amount (or estimated bid amount before the bid is submitted)
• The bid bond amount required (usually specified in the solicitation as a percentage of bid price)
• The bid due date

Bid bonds on smaller projects with an established bond line are often issued same-day or next-day. The bid bond is issued as a standard form — in most cases, the AIA A310 or a government-specified form. Your producer will tell you which form the project requires.

Step 5 — Submit the Bond With Your Bid

The bid bond goes into your bid package along with your pricing and other required documents. The project owner holds the bond until the award decision. If you're awarded the contract and you sign it, the bid bond is released with no claim. If you're awarded the contract and you don't sign, the owner can make a claim on the bond to cover the difference between your bid and the next-lowest bid.

What Happens After You Win?

A bid bond gets you to the table. Once you're awarded the contract, you'll need a performance bond (and usually a payment bond) before work can begin. Those are separate from the bid bond and carry a premium based on the contract value. Your producer handles both. The performance bond process is faster once your bond line is already established.