What is a bid bond, exactly?
A bid bond is a form of surety bond that kicks in after a contractor is awarded a contract. The person or organization providing the contract criteria ensures that the winning bidder will be able to get the necessary personnel and supplies to accomplish all contracted tasks within the agreed-upon time limit.
This assures timely completion while also protecting those who may be harmed by delays, such as investors and customers. Owners of the land where the building is taking place are additionally protected by bid bonds, which ensure that their interests are reflected during the construction process.
The amount required is normally ten percent (10%) of the bid bond’s entire value. Additionally, if less than 15% of the anticipated cost remains at 75% after the contract is granted, another 10% will be payable prior to the issue of material orders or the scheduled start of work.
Once the project is awarded, the bid bond assures that the contractor will furnish a completion bond for 100 percent of the project’s value.
This sort of surety also guarantees that any subcontractors who are required to work on the task will be secured and/or guaranteed by them by performing (the bond company).
In Oregon, what are the conditions for obtaining a bid bond?
When getting a bid bond in Oregon, there are no precise criteria. The sole stipulation is that it comes from a surety business that is allowed to supply bid bonds in Oregon. In addition, for a properly issued bid bond, the surety bond must include the precise wording and content needed by law.
The bidding procedure may be difficult and hazardous since you never know whether organizations or individuals would actually undertake the work if you win the contract. A bid bond mitigates this risk by ensuring that if a contractor is awarded a project, they will arrive prepared to finish the work as promised in their proposal. A well-written bid bond protects against losses caused by bad faith, dishonesty, or inability to follow the contract’s terms and specifications.
The bid bond assures that if a contractor is unsuccessful in winning a project, the bid bond will be forfeited, repaying the owner for any expenditures incurred during the bidding process. As required by law, this is normally one percent (1%) of the entire value of the offer. The cost of obtaining a bid bond varies based on a number of criteria, including:
- The duration of the bond is the time it takes for the bond to mature.
- The surety firm you select
- Creditworthiness of you
- Your capacity to pay all or part of the bill in one go or in installments.
- It should never exceed 1% of your entire bidding price, according to a reasonable rule of thumb. If the project is worth $1 million, your bid bond premium should not be more than $10,000.
What is the cost of a bid bond in Oregon?
The small business that won the bid to deliver items or services for you is required to secure performance, payment, and/or a bid bond under the terms of the contract. This sort of bond safeguards your money if the company fails to satisfy its contractual responsibilities. The quantity of money you’ll need to secure is determined by your contract with the contractor.
For example, if they were awarded $50K in work, you can require them to obtain between 10% and 25% (or even more) of the whole amount through their Bid Bond. The cost of getting an estimate for this normally runs from $500 to $1,000, while there are factors that might cause pricing to change somewhat. For additional information on expenses and how to get started, please contact us.
In Oregon, where can I receive a bid bond?
Performance and payment bonds are used to ensure that projects continue forward, as every general contractor or owner knows. Without them, promising initiatives might get stymied due to circumstances beyond your control.
If a contractor’s bid is approved, most jurisdictions require them to post a bid bond. Bonds or contract bonds are not prohibited by the Oregon Contractors Board. Most jurisdictions, on the other hand, do so for public construction projects exceeding $100,000 that were formerly subject to Davis-Bacon Act wage rate restrictions.
Contractors that acquire employment on government building projects in Oregon are not required to obtain these sorts of bonds by law. “If you’re working as a subcontractor on a public works project, you might want to consider getting a bid bond,” in other words.
You could consider filing requests for payment bonds while working on projects with the federal government’s General Services Administration (GSA), state agencies, or school districts under the Public Works Development Program. Again, there is no legal necessity in Oregon, but it can be in other places where you find a job.
If you are hired by a private company or individual to work on their home or business, there is no legal necessity in Oregon to get payment and performance bonds. To learn more about any bonding requirements that may exist for a specific project, contact your insurance agent or broker directly.
Is there a need for a bid bond in Oregon?
A bid bond is generally one of the conditions that must be met in order to obtain a contract. Many various sorts of businesses, such as construction companies and vendors that wish to be paid after they finish a task, require bid bonds. These might be perplexing at times, particularly when it comes to state legislation.
Contractors in Oregon are not required to post a bid bond before being awarded a contract for work or services performed inside the state. However, depending on your unique scenario, there may be some additional criteria. This implies that unless the owner expressly demands it, you do not need to provide this form if your organization is looking for contracts in Oregon.
It also indicates that if this form is submitted, you do not need to include it in your proposal. However, there may be other criteria that you must meet before receiving the contract, such as insurance coverage and contractor bonding certificates.