What is the primary purpose of a bid bond?

The primary purpose of a bid bond is to protect against contractor default. When a contractor submits a bid for a project, the bid bond serves as a financial guarantee that the contractor will enter into the contract and fulfill their obligations if awarded the job. If the contractor fails to do so, the bond ensures that the project owner can receive compensation for the potential losses incurred, allowing them to seek a different contractor to complete the work without significant financial repercussions.

The bid bond acts as a safety net, establishing that the contractor has the financial backing necessary to take on the project. In this context, it reduces the risk for project owners, making it an essential part of the bidding process.