Bid Bond vs. Payment and Performance Bond
- Thread starter beegee
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This link will send you to a site that explaind the Bonds http://www.answers.com/topic/bid-bond Just type in Bid Bond in the search
Buck Parrish
Senior Member
- Location
- NC & IN
Evidentally , Contractors bid, then change their minds about the price of the bid or they may decide to not do the job at all.
Thats what a bid bond protects against
mkgrady
Senior Member
- Location
- Massachusetts
A bid bond garantees the awarding authority that you will sign a contract for the amount of your bid. If you do not the bond is used to collect the difference between your bid and the next low bidder or up to the value of the bid bond. Bid bond are normally provided to bidders at no cost, but that is because the surety has already received a garantee of reimbursement of any costs from the bidder
A performance and payment bond is there to garantee you finish the job and pay your suppliers and subs. It keeps the awarding authority out of the disputes between the parties as long as the bonded contractor is not in default
mkgrady
Senior Member
- Location
- Massachusetts
In many cases a contractor can claim a mistake in bid and get away with no penalty. They usually have to give up the contract though. The mistake normally has to be arithematic in nature and not just bad judgement. There is such a thing as correcting an error in a bid and still being the low bidder that receives the job. Surprised? It is very rare but I have seen it happen. My experience is in federal contracts
Dnkldorf
Senior Member
I thought bid bonds work the opposite. If you are the lowest bidder and default, and the solicitor has to award the contract to a higher bidder, you're bond is for the difference.
mkgrady
Senior Member
- Location
- Massachusetts
Yes, but you haven't said pre-award or post award od contract. Pre-award the bid bond is the garantee to the awarding authority. Post-award the performance bond is.
CopperTone
Senior Member
- Location
- MetroWest, MA
tpyically for public work jobs we have to submit with our bid a 5% bid bond. This essentially is your gaurantee to the awarding authority that you will sign a contract within 5 days of being presented with one at your bid price or they can call in your bond and get 5% of your bid. The bonding company would pay out and of course comes after you for the money.
once you have a contract, the GC or awarding authority may require a performance and payment bond - this bond gaurantee's that you will actually complete the work and you will pay all your bills related to that job. If you walk away from the job 1/2 way through the bonding company may be responsible to finish the project or may pay out in cash the amount needed to complete the job. Again - they come after you for the money they pay out.
I like having bonds because it protects me that the GC will pay me for the job as well.
The bid bonds are cheap money - kind of free - we pay a yearly fee to be able to get an unlimited amount of bid bonds. the P&P bonds at like $30 per 1k for us.
once you have a contract, the GC or awarding authority may require a performance and payment bond - this bond gaurantee's that you will actually complete the work and you will pay all your bills related to that job. If you walk away from the job 1/2 way through the bonding company may be responsible to finish the project or may pay out in cash the amount needed to complete the job. Again - they come after you for the money they pay out.
I like having bonds because it protects me that the GC will pay me for the job as well.
The bid bonds are cheap money - kind of free - we pay a yearly fee to be able to get an unlimited amount of bid bonds. the P&P bonds at like $30 per 1k for us.
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