Chapter 2 — Types of Surety Bonds
What Is a Bid Bond?
A bid bond, often called bid security, assures the procuring entity that a bidder will honour its bid and execute the contract with the required bonds if awarded. It is normally required at bid submission.
What a bid bond covers
A bid bond answers for the procuring entity's loss if a bidder withdraws its bid during the period of bid validity, refuses to accept an award, or fails to post the required performance security and sign the contract. In practice it discourages speculative bidding and protects the cost of re-bidding.
Amount and form
Bid security is normally expressed as a percentage of the approved budget for the contract, with the applicable percentage stated in the bidding documents. Bidding documents typically allow a choice of forms — cash or manager's cheque, bank guarantee, or a surety bond callable on demand from a company with the required certification. A surety bond is commonly chosen because it preserves cash for mobilisation.
Validity
The bid security must remain valid for the period stated in the bidding documents, which is tied to bid validity and may need extension if the procurement process runs long. Diarise this date: a lapsed bid security can render a bid non-responsive.
What is usually needed to obtain one
- The invitation to bid or bidding documents showing the required amount, form and validity.
- Company registration documents and, for construction work, licence and classification records.
- Latest financial statements.
- Signed application and indemnity documentation.
Because the bid stage precedes any contract, bid bonds are usually the most straightforward bond to obtain — but the requirements are set by the insurer, not by the platform.
After award
Winning changes the picture. Award normally triggers a performance bond requirement, and often advance payment and warranty obligations later. Plan for those before you bid, because a bid you cannot bond after award is worse than no bid at all.
Common mistakes
Submitting the wrong percentage, using a form the bidding documents do not allow, letting validity lapse, or leaving the request to the last day before bid submission.
Key takeaway
Bid security backs your bid and your commitment to sign with the required bonds — check the amount, allowable form and validity period in the bidding documents.
Related topics
Relevant bond information
Need information about a surety bond requirement?
Submit an inquiry with your project details, and SuretyPH will organize your submission for the applicable insurer's evaluation.
Important Notice
SuretyPH is a digital platform for surety bond information, inquiries, and application facilitation. Submission of an inquiry or supporting documents does not constitute approval, binding, or issuance of a surety bond. Any formal application is subject to the requirements, evaluation, underwriting, terms, conditions, and approval of the applicable duly licensed insurance company.
SuretyPH is a digital platform for surety bond information, inquiries, requirements and request tracking. It does not underwrite, approve, bind, issue, or guarantee any insurance policy or surety bond. Evaluation, underwriting, approval, pricing and issuance are undertaken by the applicable licensed insurance company.