What is the purpose of a bid bond?

The purpose of a bid bond is to ensure that the contractor will enter into the contract at the bid price they have submitted if they are awarded the project. This bond acts as a form of security for the project owner, assuring them that the contractor is serious about their proposal and that they have the financial capability to proceed if selected. In the event that the contractor fails to honor their bid or does not sign the contract, the project owner can claim the amount of the bid bond, which compensates them for the difficulties and costs involved in re-bidding the project or finding a new contractor. This mechanism protects against non-performance and helps maintain the integrity of the bidding process, encouraging competitiveness and commitment among contractors.