NASCLA Accredited Commercial General ContractorGeneral RequirementsEasy
A general contractor is preparing to submit a bid for a new municipal library project. The bid documents specify that a bid bond is required. What is the primary purpose of this bid bond?
- ATo ensure the contractor will pay all subcontractors and suppliers.
- BTo assure the owner that the contractor will enter into the contract if awarded the bid.
- CTo guarantee the contractor will complete the project on time and within budget.
- DTo protect the owner against defective workmanship during the warranty period.
Show answer & explanationAnswer & explanation
Correct answer: B. To assure the owner that the contractor will enter into the contract if awarded the bid.
A bid bond provides financial assurance that the bidder, if selected, will enter into the contract at the submitted bid price and provide any required performance and payment bonds.
Why the other options are wrong
- A. This is the purpose of a Payment Bond.
- C. This is the purpose of a Performance Bond.
- D. This relates to warranty or possibly a maintenance bond, not a bid bond.
Bid Bond
A type of surety bond used in the bidding process to guarantee that a contractor will enter into a contract if their bid is accepted.
- Protects the project owner.
- Compensates the owner if the selected bidder withdraws or fails to sign the contract.
- Typically a percentage of the total bid amount.
Memory trick: Bid bonds ensure you 'bid' and 'bind' to the deal.