The Procurement Glossary » Bid Bond

Bid Bond

Sourcing & RFx

Definition

A guarantee submitted with a bid that the bidder will honour its offer and enter the contract if selected.

Explanation

Common in tendering and construction, a bid bond protects the buyer from bidders who win and then walk away. If the winner defaults, the buyer can claim the bond to cover the cost of re-awarding.

Example

Each tenderer posts a 2% bid bond; the winner's converts to a performance bond on contract signature.

Related terms

• Tender — A formal, often public, invitation for suppliers to submit competitive offers for a defined contract, common in government and large-enterprise buying.
• Performance Bond — A guarantee that a supplier will fulfil its contractual obligations, giving the buyer financial recourse if it fails.
• Bid — A supplier's formal priced response to a sourcing request, stating what it will supply, at what price and on what terms.

Frequently Asked Questions

What is Bid Bond?

A guarantee submitted with a bid that the bidder will honour its offer and enter the contract if selected. Common in tendering and construction, a bid bond protects the buyer from bidders who win and then walk away. If the winner defaults, the buyer can claim the bond to cover the cost of re-awarding.

Can you give an example of Bid Bond?

Each tenderer posts a 2% bid bond; the winner's converts to a performance bond on contract signature.

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