What Is a Bid Bond?
By Wyatt Cooper · Published · 3 min read
Key takeaways
- A bid bond protects the owner from a low bidder who walks away: the surety pays up to the bond's penal sum.
- Federal construction asks for a bid guarantee of at least 20% of the bid price, capped at $3 million, whenever performance bonds are required, unless waived.
- A bid bond is about signing the contract; a performance bond is about finishing the work.
A bid bond is a surety's guarantee, submitted with a bid, that the bidder will not withdraw its bid during the acceptance period and, if awarded, will sign the contract and furnish the required performance and payment bonds. If it backs out, the surety covers the owner's loss up to the bond's penal sum, usually a percentage of the bid.
How a bid bond works
Federal rules define a bid guarantee as security that the bidder "will not withdraw a bid within the period specified for acceptance" and "will execute a written contract and furnish required bonds" (FAR 28.001). On construction, only a separate bid guarantee is acceptable (agencies may insist on a separate bid bond), and one is required only where performance bonds are (FAR 28.101-1). The amount "shall be at least 20 percent of the bid price but shall not exceed $3 million" (FAR 28.101-2). Private owners and GCs set their own percentage in the invitation.
Bid bond at the federal minimum
- Bid price
- $1,000,000
- Bid bond, 20% of the bid
- $200,000 penal sum
- Bid price of $20,000,000
- 20% would be $4,000,000; capped at $3,000,000
Bid bond vs. performance and payment bonds
The SBA puts the three side by side: a bid bond "ensures full payment and performance bonding from the contract bidder," a performance bond "ensures full completion of a contract," and a payment bond "ensures full payment to the suppliers and subcontractors" (SBA). The bid bond ends when the contract and its bonds are signed. The other two are covered in performance and payment bonds.
When a GC asks subs for a bond, price it as a separate add so the GC can level bids with and without it, as how to write a subcontractor proposal explains. The bond requirement belongs in the invitation to bid.
The bottom line
A bid bond guarantees the bidder will stand behind its price: sign the contract and furnish the bonds, or the surety pays.
Line up your surety before bid day, because the bond goes in with the bid. Join the waitlist to try Conflo for bidding.
Sources
- FAR 28.001, Definitions — Acquisition.gov, U.S. General Services Administration. Read October 22, 2026.
- FAR 28.101-1, Policy on use — Acquisition.gov, U.S. General Services Administration. Read October 22, 2026.
- FAR 28.101-2, Solicitation provision or contract clause — Acquisition.gov, U.S. General Services Administration. Read October 22, 2026.
- Surety bonds — U.S. Small Business Administration. Read October 22, 2026.
Questions
When does a bid bond end?
When the bidder signs the contract and furnishes the required bonds, or when the bid's acceptance period runs out without an award. Until then, the bidder is held to its price.
Can I use a cashier's check instead of a bid bond?
Only if the invitation allows it. On federal construction an agency may insist on a separate bid bond; private invitations say what they accept.
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