Overview
A bid bond guarantees that a contractor who is awarded a project will sign the contract at the bid price and post the required performance and payment bonds. The owner (the obligee) takes it with the bid so a low bidder cannot walk away after winning and leave the owner to re-bid the work at a higher cost. If the winning bidder backs out, the owner can recover the difference between the bid and the next viable offer, up to the bond amount.
Bid bonds are standard on public construction. Federal solicitations require them under the Miller Act, and state and local work under the Little Miller Acts. The bond is usually 5 to 10 percent of the bid amount. A bid bond is typically issued at no separate charge because it is part of the surety relationship that will back the final performance and payment bonds, so a surety only issues one once the contractor is pre-qualified to carry the job.
A bid bond is a three-party guarantee among the contractor (the principal), the owner (the obligee), and the surety. If the surety pays the owner's loss, the contractor reimburses it under the indemnity agreement.
Who needs this bond
Contractors bidding public works, federal Miller Act projects, and private jobs where the owner requires a bid guarantee with the proposal.
Typical amount and term
Bid bonds are usually 5 to 10 percent of the bid amount and are commonly issued at no separate charge as part of the surety relationship that backs the final bonds.
What this bond costs
Your premium is a small percentage of the bond amount, set by underwriting. The biggest drivers:
- The contractor's bonding capacity for the underlying performance and payment bonds
- Personal and business credit of the owners
- Working capital and the financial statements
- The size and type of the project being bid
| Scenario | Bond amount | Estimated premium |
|---|---|---|
| Pre-qualified contractor bidding public work | 5 to 10 percent of the bid | usually issued at no separate charge inside a program |
| First bid bond, solid credit | 10 percent of the bid | underwritten with the final bond capacity |
| Large solicitation | 5 percent of the bid | issued once aggregate capacity is approved |
Figures are illustrative premium ranges, not quotes or statutory amounts. Your rate depends on the bond amount your obligee requires and your underwriting profile.
What you will need
- Project name, bid date, and obligee details
- The contractor's surety questionnaire and recent business financials
- Confirmation of bonding capacity for the final performance and payment bonds
How to apply
- Tell us the project, bid date, and required bid percentage
- Pre-qualify your bonding capacity with one underwriting package
- Receive the bid bond in time for the bid submission
- Convert to performance and payment bonds at award
How a surety bond differs from insurance
A bid bond is a surety guarantee, not insurance. It protects the owner against a winning bidder who refuses to sign, not the contractor's own losses. If the surety pays the owner's re-bid cost up to the bond amount, the contractor repays it under the indemnity agreement.
Frequently asked questions
How much does a bid bond cost?
A bid bond is usually issued at no separate charge because it is part of the surety relationship that backs your performance and payment bonds. You qualify for it by qualifying for the final bonds.
What is the bid bond amount?
Commonly 5 to 10 percent of the bid amount, set by the owner in the solicitation. It caps what the owner can recover if you win and then back out.
What happens if I win and do not sign?
The owner can call the bid bond and recover the difference between your bid and the next viable bid, up to the bond amount. The surety pays the owner and then seeks reimbursement from you.
Do I need a bid bond and a performance bond?
Yes, on most public work. The bid bond backs your bid; the performance and payment bonds back the contract once you are awarded. They are issued in sequence by the same surety.
More contract bonds
Reviewed by the Cornerstone Surety bond team. Last reviewed 2026-06-17.