A contractor submits the lowest bid; which bond type protects the owner if the contractor back out after bidding?

A contractor submits the lowest bid; which bond type protects the owner if the contractor back out after bidding?

• A. Bid bond
• B. Performance bond
• C. Payment bond
• D. License bond

Answer: (A)

Bid security protects the owner when the winning bidder backs out after the bid. A bid bond is posted with the bid and acts as a guarantee that the bidder will enter into the contract at the bid price if awarded. If the bidder withdraws, the bond can compensate the owner for the cost of obtaining a new bid or the difference between the original bid and the next lowest bid, up to the bond amount. This prevents the owner from incurring substantial delays and extra costs while a new contractor is sought. After a bid is accepted, a performance bond then guarantees the contractor will complete the work, and a payment bond guarantees payment to subcontractors and suppliers; a license bond serves to ensure licensing compliance.

Bid security protects the owner when the winning bidder backs out after the bid. A bid bond is posted with the bid and acts as a guarantee that the bidder will enter into the contract at the bid price if awarded. If the bidder withdraws, the bond can compensate the owner for the cost of obtaining a new bid or the difference between the original bid and the next lowest bid, up to the bond amount. This prevents the owner from incurring substantial delays and extra costs while a new contractor is sought. After a bid is accepted, a performance bond then guarantees the contractor will complete the work, and a payment bond guarantees payment to subcontractors and suppliers; a license bond serves to ensure licensing compliance.