What Is a bid bond?
A bid bond is a type of surety bond that becomes active as soon as a contractor wins a contract. The person or organization offering the contract requirements guarantees that the successful bidder for the work will secure the required labor and materials to complete all contracted tasks within an agreed-upon time frame.
This ensures prompt completion and protects others who might be affected by such delays, including investors and consumers. Bid bonds also protect owners of property on which construction is taking place, ensuring their interests are represented during construction.
The amount required is usually ten percent (10%) of the total value of the bid bond. Additionally, once awarded, if less than 15% of the estimated cost remains at 75%, another 10% will be due prior to issuance of material orders or a scheduled commencement of work.
The bid bond guarantees that the contractor will provide a completion bond for 100% of the value of the project once awarded.
By performing, this type of surety also provides a guarantee that all subcontractors who are necessary to perform on the job will be secured and/or guaranteed by them (the bond company).
What are the requirements when getting a bid bond in Oregon?
There are no specific requirements when you get a bid bond in Oregon. The only requirement would be that it is from an authorized surety company to provide bid bonds in the state of Oregon. Also, the surety bond must have the correct wording and language required by law for a properly executed bid bond.
The bidding process can be complicated and risky not knowing what companies or individuals might actually perform the work if they do win the contract. A bid bond provides some relief from this risk by guaranteeing that if a contractor does win a project, they will show up ready to complete the job as promised in their proposal. The purpose of a well-written bid bond is to protect against losses due to bad faith, dishonesty, or failure to comply with the terms and specifications of a contract.
The bid bond ensures that if a contractor fails to win a project they will forfeit the bid bond, thus compensating the owner for any costs accrued during the bidding process. This is usually one percent (1%) of the total amount of the bid as set forth by law. The cost to obtain a bid bond can vary depending on various factors such as:
- Length of the bond period
- The surety company you choose
- Your creditworthiness
- Your ability to pay all or part upfront or on an installment basis.
A good rule of thumb would be that it should never exceed 1% of your total bidding price. For example, if the project costs $1 million dollars, your bid bond premium should not exceed $10,000.
How much is a bid bond in Oregon?
The contract of the small business that has won the bid to provide products or services for you requires them to secure performance, payment, and/or bid bond. This type of bond protects your investment should the business fail to meet its contractual obligations. The amount of money that needs to be secured will depend on your agreement with the contractor.
For example, if they were awarded $50K worth of work, you can require them to secure between 10-25% (in some cases even more) via their Bid Bond. To get an estimate on how much this would cost typically ranges anywhere from $500-$1,000 although there are factors that can cause rates to fluctuate slightly. Contact us for more information on costs and how to get started.
Where can I get a bid bond in Oregon?
As any general contractor or owner knows, performance and payment bonds are used to ensure projects move forward. Without them, good projects can be held up because of factors beyond your control.
Most states require contractors to provide a bid bond if their project bids are accepted. The Oregon Contractors Board does not have requirements forbid bonds or contract bonds. Most jurisdictions do, however, for public construction projects over $100,000 that previously were subject to federal wage rate requirements under the Davis-Bacon Act.
In Oregon, there is no legal requirement that these types of bonds be obtained by contractors who secure work on government construction jobs. In other words: “if you’re working as a subcontractor on a public works project, you may want to consider obtaining a bid bond.”
For example, when working on projects with the federal government’s General Services Administration (GSA), state agencies, or school districts under the Public Works Development Program, you might consider submitting requests for payment bonds. Again, no legal requirement exists in Oregon – but it may be required in other jurisdictions where you secure work.
There is also no legal requirement in Oregon to obtain payment and performance bonds if you are awarded work by private companies or individuals for their personal residence or business. You can contact your insurance agent or broker directly to find out more about any bonding requirements that may exist for a given project.
Is a bid bond needed in Oregon?
A bid bond is usually one of the requirements you will need to meet in order to get a contract. Bid bonds are required by many different business types, including construction companies and vendors who want to be paid once they have completed their job. These can sometimes be confusing, especially when it comes to state laws.
The state of Oregon does not require contractors to provide a bid bond before getting a contract for work or services that they will perform within the state. However, there are some other requirements that may come into play depending on your specific situation. This means that if your company is looking at contracts in Oregon, you do not need to supply this form yourself unless the owner specifically requests it.
It also means that you do not need to include this form in your bid if it is submitted. However, there are other requirements that may be necessary for you to fulfill before getting the contract, such as insurance policies and bonding documents for contractors.