What is the definition of a bid bond?

A bid bond is a debt that a bidder takes on in the case of a construction job or other bid-based job to reassure the project owner that the bidder will indeed perform the job, if selected. This assures the owner that the bidder has financial means.

Bid bonds make contract bidding and the ensuing job contract run smoothly, as the owner knows the bidder is able to complete the job without having cash-flow issues along the way. The bid bond is not more than 10 percent of the total contract order amount and may be subject to partial or full forfeiture if the winning contractor fails to perform the project.