Bid bonds protect the county from bidders who win and then walk away. Counties commonly require one for construction and public works bids, and sometimes for large purchases of goods.
State examples
- Iowa: for public improvements, bid security must be at least 5% and no more than 10%, set by the county (Iowa Code 26.8).
- Indiana: for public works estimated over $200,000, the county must require a bond or certified check with each bid, capped at 10% of the contract price (IC 36-1-12-4.5).
Getting bid bonds
Bonds come from a surety company, usually through an insurance agent who specializes in bonding. Set up the relationship before you need it; a surety reviews your finances and experience and sets a bonding limit. A missing or incorrect bid bond is one of the most common reasons a low bid is rejected.
Questions
How much is a bid bond?
Usually a percentage of the bid, set in the bid documents, commonly 5% to 10%. The surety charges a small fee or provides it as part of your bonding relationship.
Can I use a cashier's check instead?
Often yes. Many counties accept a certified or cashier's check as bid security instead of a bond.