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Bid bond

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Bid bond
A bid "performance" bond consisting of a small percentage (1-3%) of the tender contract price, refunded to losers once the contract is awarded.

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There are three bonds a contractor wants to qualify for: first, the bid bond, in effect "insurance" that the company is suitable to bid on a particular job; second, the payment bond, with which the bonding entity (insurer) backs up the contractor's promise to pay employees, subcontractors and suppliers; and third, the performance bond, which commits the insurer to getting the job done if the contractor can't.
For example, a bid bond may not typically be required by a camp facility, as it only provides a guaranty that the contractor will accept his bid if awarded.
Association members produce about 70% of the bid bonds in the United States.
 
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