Secrets of Bonding 116: How NOT To Handle Bid Bonds

Like everything else, there is a right way and a wrong way when it comes to bidding on bonds. You may like to learn from your mistakes, but these lessons can be expensive. Breaking a bid bond can result in the loss of a lucrative contract. It can cause your bonding relationship to disappear, it could become the basis of a lawsuit, or it could just make you look bad in front of your boss. In any case, it is better to learn the easy way so …

There are three things to remember when it comes to bidding for bonds:

Underwriters view the offering bond as the first link in a chain of events that will hopefully result in the issuance of a performance bond. Therefore, the decision Section Bonds to provide it is based on the ability of the surety to support the eventual P&P surety that may result. The decision is based on the potential dollar value of the contract, not the offering bonus. A 10% bid bond on a $ 1 million proposal is not a $ 100,000 decision.

There is such a thing as a bid bond claim. We don’t “just broadcast” them.
Don’ts # 1

Just to make sure you have the bid bond on time, you can advance the date on the Bond Request Form. The offer is actually the 25th, but you indicate the 22nd, just so they don’t screw it up. Very smart?

Not really. The insurer will probably ask you for a copy of the invitation to bid and you will see the actual date. Also, they may have other bidders on the same job, and the information is probably available online, etc. Such tactics can damage your relationship with bail. You want to be cute, but not this way.

Don’ts # 2

It is common for surety bonds to indicate a maximum dollar amount (bond line) that they will support in a single contract. Let’s say it’s $ 1 million per job.

If your bid estimate for an upcoming project is firm at $ 1.25 million, what should you do?

Another scenario: You expected not to exceed $ 1 million, but a supplier or subcontractor’s price comes in higher than anticipated at the last minute!

Lower the offer to $ 1 million to fit the line and hope to make up the difference on the project?
Asking for the $ 1 million bond but submitting an offer for $ 1.25 million and then claiming it was a communication error?
Use the $ 1 million offer bonus, then plan to get a different guarantee that will provide a $ 1.25 million P&P bonus?
Not bidding on the job?
There is really no way to “sneak” into an offer for a higher amount. The system is configured to avoid this. Additionally, the guarantee may issue a limited offer bond, which means it is void if used for more than the approved project amount.

The best option is to make a special presentation to the subscriber and get support for $ 1.25 million. All other options can have bad results.

Don’ts # 3

A new project opportunity appears and there is not enough time to get a bond. Is better:

Submit the offer without collateral and expect to deliver it later?
Use a check instead of an offer voucher and hope to exchange the voucher for the check after the offer opens?
Not bidding on the job?
A possible solution could be an electronic copy of the bid bond (which can be printed and signed / stamped by the contractor). Most obligees will agree to this, at least temporarily.

We do not recommend bidding by check unless the surety has indicated your support for the project. Without that commitment in hand, failure to provide a P&P bond could result in the loss of the warranty and the offer contract. Bad result!

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