How Long Do Bid Bonds Last?

bid bonds - How long is a bid bond good for - minimal home

How long is a bid bond good for?

A bid bond is a performance and payment bond. A bidder on a public project must usually include both types of bonds with his or her bid, to assure the owner/issuer that the bidder will either perform or make payments if he loses the contract. Bid bonds are not intended for use by contractors during construction; they’re intended to protect the owner.

The specific terms of bid bonds vary, because owners/issuers may choose to require different amounts of security for different types of projects. Bid bonds must be filed with the owner/issuer within a specified period after the bid opening (usually 30 days). If the bidder is successful in obtaining the project, he must furnish a performance bond and/or payment bond when called upon to do so.

Most bid bonds require that the surety company pay all claims, attorneys’ fees, and court costs, plus a penalty for late payment of up to 10 percent of the full amount due. The penalty is usually paid even if it exceeds these amounts. A bid bond is not intended to be an insurance policy, however. It does not cover the cost of labor, equipment, or materials. If the contractor becomes liable because of faulty workmanship, he must pay his own losses even if they are greater than the total amount of security required by the bid bond.

How long does a bid bond last?

Typically, a bid bond is dated for twelve months from the date of issuance. The purpose of a bid bond is to provide assurance that the bidder would fulfill its part of the contract if it wins. As such, the length should align with the expected time required to complete construction milestones under the contract.

Typically, a long-form bid bond will include this language:

The principal shall immediately execute the contract documents and all requirements of the Owner on its part to be performed, including but not limited to submitting certified payroll records for each wage period ending within one (1) calendar month; filing any required lien releases; providing performance, labor, and material payment bonds if required by law or contract; furnishing instruments of payment or performance bonds within ten (10) days after receipt of written notice that the Owner requires such bonds; furnishing all other documents and doing all actions necessary to complete this contract.

The twelve-month date specified in long-form bids is typically for reference only because there are requirements that must be met before the bid bond is submitted to the owner.

The long-form bid bond must be submitted along with the bid, but some owners will not accept a bid bond if it is submitted prior to awarding the contract or receiving notice of award. Some states also require that the date on the bid bond be within 90 days after the submission of bids. Once awarded, change orders and the insured’s duty to keep up with progress and deadlines may cause some delays and extensions (although there is usually a duty on the contractor to provide an update). As such, it is likely that most bid bonds will become effective within 90 days after issuance.

When should a bid bond be required?

When construction and renovation projects start, there is often a requirement for contractors to post a bid bond. What does this mean, and what does it accomplish? A bid bond ensures that the contractor will perform as promised if he wins the job. The surety company issues the bond on behalf of the contractor. If the bidder does not win the job, there is no payment required from him. The surety company that backs a bid bond only requires the contractor who wins the bid to pay a small premium for this guarantee.

The bid bond is intended to ensure that bidders have sufficient resources and funds in place to complete the contract. If a contractor has serious doubts about his ability to perform, he should not be bidding on the job in the first place! If he wins, he does not have the backing of a surety company…if he loses, no payment is required from him.

A bid bond is not required by law. The lender does not require it; the General Contractor (GC) does not require it, and the Owner usually has no idea that such an instrument even exists. A GC may be willing to waive this requirement if he feels comfortable with a bidder’s past performance record.

Does a bid bond expire?

A Bid Bond’s expiration date depends on what kind it is and how its conditions state. Most bid bonds expire 30 days after the project has been finished. If the contractor is late to pay any of their subcontractors, then there are other types of bonds that expire while they are still bidding on the job. 

One type says that if a contractor doesn’t pay certain subcontractors within 10 days or within 10% of the value of the contract whichever comes first, then the bond will be voided. Depending on the agency, they may ask for other requirements so it’s best to check with them.

Some bid bonds are made conditional upon the award of the contract by the owner within a certain time after the proposal due date. Thus, if no contract is awarded before this specified date, then neither the bid security nor the bid bond is forfeit.

Bid bonds usually expire 30 days after the project has been finished. But, there are also other types of bid bonds, such as those that require the contractor to pay certain subcontractors within 10 days or within 10% of the value of the contract whichever comes first. The bond will be voided if this requirement is not met.

How much does a bid bond cost?

Bid bonds are used by construction companies to ensure that they perform their work. This can be a challenge for smaller contractors, however, as bid bond costs can be higher than the amount of the bid itself. Companies should know how much a bid bond will cost them before beginning a project, and what types of documents might be required at different stages of the process.

Bid Bonds are used to ensure that a contractor performs their work. This can be a challenge for smaller contractors, however, as bid bond costs can be higher than the amount of the bid itself. Companies should know how much a bid bond will cost them before beginning a project, and what types of documents might be required at different stages of the process.

To know more about bid bonds, visit Executive Surety Bonds now!

Leave a Reply

Your email address will not be published. Required fields are marked *