Georgia Bid Bonds

Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your bid bond needs.

What Are Georgia Bid Bonds?

Georgia bid bonds provide protection for state or local contracting authorities against the financial harm that could occur if a contractor is selected through competitive bidding. Specifically, they guarantee that:

  • The bid being submitted is accurate,
  • The bidder has the capacity to furnish the necessary performance and payment bonds if awarded the contract, and
  • The contractor will accept the job if chosen as the winning bidder.

If the bidder (known as the bond’s “principal”) does not submit an accurate bid, provide performance and payment bonds, or enter into a contract, the project owner (the bond’s “obligee”) can seek compensation for monetary damages by filing a claim against the bid bond.

Who Needs Them?

In Georgia, a bid bond is required for all state public works construction projects valued in excess of $100,000. But contracting authorities can require bid bonds for projects with an estimated value below $100,000. The required bond amount must be no less than 5% of the full bid price but can be higher at the discretion of the contracting authority. In addition, private construction project owners are increasingly requiring bid bonds from contractors competing for a job.

How Do Georgia Bid Bonds Work?

There is a third party to every Georgia bid bond—the “surety.” The surety guarantees the payment of valid claims, though the principal bears the full legal responsibility for paying them.

The surety will pay the claim initially, as an extension of credit to the principal. But the principal must then repay that debt to the surety. The surety can take legal action against the principal if that becomes necessary to recover the funds.

How Much Do They Cost?

The premium cost of a Georgia bid bond is the result of multiplying the required bond amount (established by the obligee) and the premium rate (set by the surety through underwriting). The primary concern in setting the premium rate is the risk of the surety not being repaid for claims paid on the principal’s behalf. That risk is measured based on the principal’s creditworthiness.

A principal with a high personal credit score is a low risk, so the premium rate will be low. Someone with a low credit score is a higher risk to the surety, which warrants a higher premium rate.

A well-qualified principal typically will be assigned a premium rate in the range of .5% to 3%.

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