What is a 'Bid Bond'

A bid bond is a debt secured by a bidder for a construction job or similar type of bid-based selection process for the purpose of providing a guarantee to the project owner that the bidder will take on the job if selected. The existence of a bid bond provides the owner with assurance that the bidder has the financial means to accept the job for the price quoted in the bid.

BREAKING DOWN 'Bid Bond'

Bid bonds help the selection process of a job contract run smoothly. Without them, project owners would have little in the way of assurance that the bidder they select for a job would be able to properly complete the job without running into cash flow problems along the way. By providing bid bonds for their respective bids, each bidder for the project is able to provide sufficient assurance to the owner that the project is within its means.

RELATED TERMS
  1. Invitation For Bid - IFB

    When a company or organization provides detailed project specifications ...
  2. Bidding War

    A situation where two or more buyers are so interested in an ...
  3. Bidder

    The party offering to buy an asset from a seller at a specific ...
  4. Direct Bidder

    An entity that purchases Treasury securities at auction for a ...
  5. Indirect Bidder

    An entity that purchases Treasury securities at auction through ...
  6. Dutch Auction

    1. A public offering auction structure in which the price of ...
Related Articles
  1. Investing

    What's a T Bond?

    Treasury bonds, or T-bonds, are marketable securities issued by the US government, and are available in increments of $100. Bonds have a maturity range of ten to 30 years, with 30 being the most ...
  2. Investing

    Negotiating the Bid

    A bid is an offer investors make to buy a security.
  3. Investing

    Explaining Dutch Auction

    A Dutch auction is a public offering auction.
  4. Investing

    How Bid Price Affects Liquidity

    The bid price is the amount a buyer will pay for a security.
  5. Investing

    eBay vs. DealDash: Comparing Auction Sites (EBAY, PYPL)

    Learn how the bidding process works at DealDash and eBay, and discover the potential pitfalls when making bids at these auction sites.
  6. Investing

    Municipal Bond Tips For The Series 7 Exam

    Learn to distinguish between general obligation and revenue bonds to ace this test.
  7. Investing

    Yahoo Sale Takes Center Stage Before Earnings

    The company has said it will take no more bids for its core assets and make a decision about a potential suitor on, or around, Monday.
  8. Financial Advisor

    Top Tips for Prepping Your Practice for a Sale

    There’s much more to selling a business than finding the highest bidder and getting cash. Here's some help.
  9. Investing

    AT&T Jostles to Steal Yahoo! From Verizon (T, YHOO)

    AT&T is believed to be one of the bidders offering $5 billion or more. The telecom giant has been working with an investment bank on its bid for Yahoo!.
RELATED FAQS
  1. What do the bid and ask prices represent on a stock quote?

    Learn what the bid and ask prices mean in a stock quote. Find out what represents supply and demand in the stock market and ... Read Answer >>
  2. When is a takeover bid legally canceled?

    When a firm makes an official bid to take over a target company, a legal offer is created. The firm making the offer becomes ... Read Answer >>
  3. What do the numbers that follow the bid and ask numbers in stock quotes represent? ...

    When looking at stock quotes, there are numbers following the bid and ask prices for a particular stock. These numbers usually ... Read Answer >>
  4. How can a company buy back shares to fend off a hostile takeover?

    Learn about why a business might use a stock buyback to thwart a hostile takeover attempt by reducing its total assets and ... Read Answer >>
  5. Why are the bid prices of T-bills higher than the ask prices? Aren't bids supposed ...

    Yes, you are correct that the ask price of a security should typically be higher than the bid price. This is because people ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center