Bid Bond

Bid Bond Meaning:
A cash deposit made by bidders on a project. By paying a bid bond, bidders guarantee that if their bid is chosen they’ll undertake the contract for the amount of their bid. If they don’t, they may forfeit some of or the entire amount of the bid bond.

Bid Bond Example:
The idea behind bid bonds is to encourage bidders to make serious bids and to follow through on them if chosen. In the event that the chosen bidder does not undertake the contract, the amount forfeited will be the projects owner’s costs in reletting the contract, which usually amounts to the difference between the bid chosen and the next highest bid.