What is a Bid Bond?
A Bid Bond is the most commonly used risk management tool at the tender stage. It is a legal instrument, enforceable by law and is a three-party agreement with specific obligations required by each party.
A Bid Bond provides assurance to the project owner from the surety that the bidder are not only qualified, but they will take their tendering obligations seriously and will follow through on their commitments.
Bid Bonds provide pre-qualification assurances that go hand in hand with performance and payments bonds. In other words, for a surety to provide a bid bond for a contract, the contractor must be pre-qualified and must meet the surety’s criteria to be bondable from a performance perspective.
Should a contractor not enter into a contract after a bid bond has been posted, this could result in a claim against the bond for which the contractor will be held responsible for reimbursing the bonding company.
Surety For Tendering Stage
Three common forms of surety at pre-tender or tendering stage:
A pre-qualification letter is not a bond. It is a letter from Surety to the owner that confirms the “bondability” of its contractor client. A pre-qualification letter is not binding.
It is a bond issued to serve as a guarantee to a project owner that the winning bidder will satisfy the terms of a tendered contract.
Consent of Surety
Consent of Surety is also known as Agreement to Bond. It is a legal commitment, but it is not a true bond as it is only executed by the surety, not the contractor. This letter confirms to the project owner, that should the contractor be awarded the job, the surety will provide the performance and payment bond as per the terms outlined in the letter.
Interested in a Free Consultation?
Call us today.
Frequently Asked Questions
How much does a bid bond cost?
Bid bonds, pre-qualification letters, and consents of surety are provided by FCA Surety to our clients at no cost.
How do I apply?
Please call us or email us on the number and email address indicated at our Contact Us page. One of our Construction Surety Brokers will then give you a call within an hour or two to begin the process.
Are you new and emerging contractors?
- Do you need a bid, performance or labour & material payment bond under 1 Million dollars?
- Are you a new contractor looking to begin bidding on public contracts?
- Have you been told your company does not qualify for bonding?
If you answered yes to any of these questions, then FirstBond™ is perfect for you.
FirstBond is a new program by FCA Surety, it is a quick easy bonding solution for new and emerging contractors across Canada.