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. Bidder

    The party offering to buy an asset from a seller at a specific ...
  2. Bidding War

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

    1. A public offering auction structure in which the price of ...
  4. Sealed-Bid Auction

    A type of auction process in which all bidders simultaneously ...
  5. Stalking-Horse Bid

    An initial bid on a bankrupt company's assets from an interested ...
  6. Best And Final Offer

    1. In real estate, a prospective buyer's last and highest offer. ...
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

    How To Create A Real Estate Bidding War

    There are still many areas in the United States that are attractive enough to buyers that you can start a good, old-fashioned bidding war on your property.
  3. Investing

    Negotiating the Bid

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

    How Bid Price Affects Liquidity

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

    How The Auction Market Works

    Here's a look into the online auction market and how to get yourself the best value possible on sites like eBay and Quibids.
  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

    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!.
  8. Small Business

    What is a Takeover?

    A takeover happens when one company makes a bid to acquire a target company.
  9. Insights

    Twitter Stock Falls 16.28% in Pre-Market Trading After Report Says Google, Apple Won't Bid (TWTR, AAPL)

    Three potential suitors are said to be not interested in Twitter. This leaves only Microsoft and Salesforce from among the names suggested to be interested in the company.
  10. Investing

    Surprise! The Best Long-term Bond Investment May Be Savings Bonds

    A 20-year Series EE savings bond pays more interest than a 20-year Treasury bond. So are government-issued long-term bonds the best bet going?
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. 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 >>
  3. 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 >>
  4. How do day traders capture profits from the difference between bid and ask prices?

    Discover how day traders capture profits from the difference between bid and ask spreads. These spreads blow out during volatile ... Read Answer >>
Hot Definitions
  1. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  2. Aggregate Demand

    The total amount of goods and services demanded in the economy at a given overall price level and in a given time period.
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Blue Chip

    A blue chip is a nationally recognized, well-established, and financially sound company.
  5. Payback Period

    The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
  6. Collateral Value

    The estimated fair market value of an asset that is being used as loan collateral. Collateral value is determined by appraisal ...
Trading Center