Short answer
A bid bond guarantees that if you win a project bid, you will enter the contract at your bid price and provide the required bonds. A performance bond then guarantees you will complete that project according to the contract. They are common on public and large private construction work and are often required together with a payment bond.
These are contract bonds used in construction. A bid bond is submitted with your proposal and protects the project owner if a winning bidder backs out or cannot provide the final bonds, covering the gap to the next bidder. It signals you are serious and capable.
A performance bond takes over once the contract is signed and guarantees the work is completed as agreed. A payment bond usually accompanies it to guarantee subcontractors and suppliers are paid. Together they protect the owner and everyone working on the project, which is why public projects typically require them.
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