Surety Bonds secure the financial safety of an obligee when they assign a task to a contractor. Bid Bonds specifically assure that anyone who bids for the project does so in good faith. It also ensures that the contractor delivers performance as promised, along with all other bonds as applicable. The contractors on their part are assured of a higher chance to land a project of their choice. They can also submit multiple bids according to their capability.
Why Bid Bonds Are Necessary
Bid bonds bind both the obligee and contractor to the bond. The obligee has to provide an opportunity to the contractor after rolling out a project and pay according to the agreed terms. The contractor has to abide by the terms of the bond and deliver top-notch performance at an agreed price. If the contractor fails to deliver, the surety company that issued the bond has to compensate the obligee.
How the Bid Bond Cost is Calculated
Several factors determine the final value of a Bid Bond, such as:
- The total cost of the project
- The location where the project is to be executed
- The owner’s profile and record
- The contractor’s past record and financial credibility
- Any additional add-ons that may be required during the project
Role of a Surety Company
The surety company will be responsible to issue a Bid Bond after assessing the financial capability of the contractor. They have to screen the contractor’s past record to calculate the value of the premium. A good credit score should lead to a lower premium and vice versa. The surety company itself must be financially capable to finance the project before it can issue the bond.
Want to know how you can buy a Bid Bond yourself? Then contact your nearest surety company for a quick quote and other details today.