California Bid Bonds

What is a Bid Bond?

Bid bonds are a type of construction bond that protects the owner of a project or general contractor during the construction bidding process. What the bid bond guarantees is that you, as the bidder, will compensate the project owner if you fail to enter into the contract and provide any required performance and payment bonds.

A bid bond usually involves three entities: the obligee, the surety, and the principal. The obligee is the owner or general contractor of a construction project, the principal is the contractor, and the surety is the bond company that issues the bid bond to the contractor.

Who Requires a Bid Bond

In the state of California, all public construction projects  require bid bonds when you submit your bid. This is true for federal construction projects as well. The coverage value is called the penal sum and means the maximum amount of damages the surety will cover to the owner or general contractor of the construction project. It is usually required for 10% of the contract amount. Knowing what the bid bond definition is and understanding how it works are both important. Bid bonds help to discourage contractors from submitting inappropriately low bids to win a contract. 

If you have any questions about our California bid bond services or wish to partner with CSBA for your contractor bond needs, we invite you to contact us.

How to Apply for a Bid Bond

Applying for a bid bond is not too different than applying for a loan. Bond companies need to determine if you have both the experience and financial capability to complete a construction project. How a bond company determines that depends on the size of the bond you need, but revolves around the following points:

  • What is your credit score?
  • How long has your construction company been in business?
  • When is the bid date?
  • Do you have financial resources to complete the work?
  • What is your track record of profitable projects completed?
  • Do you have the labor and equipment to complete the job you’re seeking a bond for?

At CSBA, we differ from other agencies, because we have internal underwriters that guide you through this process step-by-step. We take the time to understand your unique situation and goals, which enables us to obtain the bid bonds you need quickly, so you can pursue the projects you are seeking.

What Having a Bid Bond Means

What the bid bond definition often doesn’t state is what it means to have one. When a surety agency issues a bid bond, it says to the owner of a project that a proposed contractor is financially stable and has the correct resources to handle the construction project. Since all public construction projects require bid bonds, they are the key that allows you to open the door to bidding work and can be vital to building your business.


  1. Bid bonds are required when contractors bid a project and guarantees if they are low bidder, they will enter into the contract and provide any required performance and payment bonds. Performance bonds guarantee the actual performance of the work to be completed by the contractor according to the terms of the agreement. What happens to a bid bond after a contract is signed?
  2. The bid bond is replaced by a performance bond if the bid is accepted and the contractor enters into a contract with the owner or general contractor.

There is generally no charge for bids bonds. Surety companies charge a premium for the performance and/or payments bonds if you are awarded a contract.

Get a Bid Bond Quote Now

We want to know more about how we can help your construction company get the right contractor bid bond for your next project. Fill out the form below and one of our local expert bonding agents will be in touch with you shortly.

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