What Is a Bid Bond and When Is It Required on Public Works Jobs?

A bid bond is a type of surety instrument that guarantees a contractor will enter into the contract at the price they bid, or the owner will be compensated for the difference.

It's required on many public works projects as a condition of submitting a bid. Failing to include it, or including an improper one, is one of the fastest ways to get a bid rejected as nonresponsive.

If you've been bidding public work for a while, you probably know bid bonds exist. But many specialty contractors still get tripped up by the details: the required amount, the acceptable format, the timing, and where the requirement actually lives in the bid package. This article explains what you need to know.

What Is a Bid Bond?

A bid bond is a three-party agreement between:

The principal: the contractor submitting the bid
The obligee: the public owner (city, school district, county, housing authority, etc.)
The surety: the bonding company guaranteeing the principal's obligation

The bond guarantees that if the contractor is awarded the contract, they will actually execute it at the submitted bid price and furnish any required performance and payment bonds. If they don't, the surety is liable to the owner for the difference in cost between the winning bid and the next-lowest responsive bid, up to the bond penalty.

In plain terms: a bid bond is the contractor's promise, backed by an insurance-like company, that they're serious about the price they're submitting.

When Is a Bid Bond Required?

Bid bonds are not required on every public bid. Whether they're required depends on:

The public owner's policies: most cities, counties, school districts, housing authorities, and transportation agencies require bid bonds over certain dollar thresholds
State law: many states have statutory thresholds above which bid bonds are mandatory on public works (commonly $25,000–$100,000 depending on the state)
Federal requirements: federally funded projects may have additional bid security requirements under the Miller Act or state equivalents

The only way to know whether a bid bond is required on a specific project is to read the bid documents, specifically the Instructions to Bidders, Section 00 43 13 (or equivalent), and any supplementary conditions.

Where Is the Bid Bond Requirement Hidden?

This is where contractors get into trouble. The bid bond requirement is not always prominently displayed on the bid form cover. It commonly appears in:

Instructions to Bidders: often Section 00 21 13 or 00 21 00 in CSI format
Supplementary Conditions: especially for public owner addenda
Bid Form Attachments: the actual surety form may be a separate required attachment
General Requirements: Division 01 or project-specific general conditions

A project manual can be 200–400 pages. The bid bond requirement may appear in a single paragraph on page 47 and nowhere else.

This is exactly the kind of buried requirement BidFastApp.com is designed to find.

How Much Is a Bid Bond Usually?

The required bid bond amount is expressed as a percentage of the total bid price, not as a fixed dollar figure. Common amounts include:

5% of the bid: most common on projects up to $1M
10% of the bid: used on some larger projects or by certain owners
Fixed amount (rare): some owners specify a maximum dollar cap

The percentage is applied to the total bid including all alternates, or sometimes only the base bid. The bid documents will specify which.

What Can Be Used as Bid Security?

Most public bid packages accept one or more of the following:

Bid bond from an approved surety: the most common form; the surety company must typically be on the U.S. Treasury's list of approved sureties (Circular 570)
Certified check: a check from a bank certifying the funds are available; payable to the owner
Cashier's check: similar to a certified check; acceptable in most jurisdictions that allow check alternatives
Letter of credit (rare): some owners accept bank letters of credit as bid security

The acceptable forms are specified in the bid documents. Many owners only accept a bid bond and don't accept certified checks as substitutes.

Read the documents carefully before assuming an alternative will be accepted.

What Is the Difference Between a Bid Bond and a Performance Bond?

These are often confused:

Bid bond: required with the bid submission; guarantees the contractor will enter the contract if awarded
Performance bond: required after award; guarantees the contractor will complete the project according to the contract terms
Payment bond: required after award alongside the performance bond; guarantees the contractor will pay subcontractors, suppliers, and laborers

Many public projects require all three. The bid bond is always first.

The performance and payment bonds come after the owner awards the contract and the contractor is asked to execute it.

What Happens If You Miss the Bid Bond?

If a bid bond (or acceptable alternative) is required and you don't include it, your bid will almost certainly be declared nonresponsive, meaning the owner won't even consider your price. The bid will be returned or set aside.

This is one of the most painful outcomes in public bidding: you've done all the estimating work, you might be the low bidder, and you're disqualified on a technicality that had nothing to do with your price or qualifications.

Common Bid Bond Mistakes to Avoid

Wrong percentage: Using 5% when the project requires 10%, or vice versa
Wrong surety: Using a surety not on the Treasury approved list when the owner requires it
Wrong payee: Making the bond out to the wrong owner entity (e.g., "City of Springfield" instead of "Springfield School District")
Missing attachment: Submitting the bid form without the actual bond document attached
Unsigned bond: Bond not signed by both the principal and surety attorney-in-fact
Expired power of attorney: The surety's power of attorney attached to the bond is outdated
Not reading the requirement: Assuming the project doesn't require a bid bond because the form cover page doesn't mention it

How to Handle a Tight Deadline

If you receive a bid package late and your surety normally takes 2–3 business days to issue a bond, you may be cutting it close. Steps to take:

Contact your surety immediately when you receive the bid package. Don't wait until you've finished estimating.
Confirm the required amount and acceptable format before ordering the bond
Have your surety confirm turnaround time in writing
Verify the bond is signed, sealed, and the power of attorney is current before submitting

If you genuinely can't get a bond in time, check whether the owner accepts a certified check as an alternative. If so, arrange that as a backup while still pursuing the bond.

The Bottom Line

A bid bond is not just a formality. It's a condition of your bid being considered at all on most public projects.

The requirement is frequently buried in supplementary conditions or Instructions to Bidders sections that contractors skip when they're focused on estimating.

Getting a second set of eyes on the compliance requirements before you finalize your bid package is the fastest way to avoid a rejection that has nothing to do with your price.