Iowa Bid Bonds

Iowa Bid Bonds

Surety Bond Professionals is a family owned and operated bonding agency with over 75 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 Iowa Bid Bonds?

Government (state or local) contracting authorities and many private project owners rely on bid bonds to protect them against the financial losses they can experience due to the actions of the winning contractor chosen through competitive bidding. Iowa contractors purchasing a bid bond are guaranteeing that:

  • Their bid on a project is accurate,
  • They will be able to furnish any required performance and payment bonds required from the winning bidder, and
  • They will accept the contract if offered the job.

A bid bond provides a way to compensate the project owner (the bond’s “obligee”) for monetary damages if the contractor (known as the “principal”) fails to live up to this guarantee. 

Who Needs Them?

Nearly all construction projects funded by a state or local government contracting authority require bidders to provide a bid bond. So do many private construction projects. In Iowa, the required bond amount typically is five to ten percent of the full bid price.

How Do Iowa Bid Bonds Work?

In addition to the obligee and the principal there is a third party to every Iowa bid bond—the bond’s guarantor (called the “surety”). Although the principal is legally obligated to pay a valid claim, the surety guarantees that the principal will pay by agreeing to extend credit to the principal for that purpose if needed.

In practice, the surety will pay the claimant directly, creating a debt that the principal must then repay according to the surety’s credit terms. Not repaying that debt can subject the principal to legal action by the surety to recover the funds.

How Much Do They Cost?

In Iowa, the cost of bid bonds is a significant factor to keep in mind when participating in the competitive bidding process for construction projects. That’s why at Surety Bond Professionals we offer our bid bonds for free, with the assumption that you will purchase the necessary Performance and Payment (P&P) bonds through our surety to proceed with the construction work. 

The obligee, which is the project owner, decides the required bond amount, typically set at 5% or 10% of the total bid amount for the project. The cost of bonds in Iowa varies based on the project's complexity and size. Smaller contracts and businesses are primarily evaluated based on the contractor's personal credit history. Larger projects may involve a more comprehensive evaluation, considering factors such as the project's location, the contractor's financial stability, and their overall creditworthiness, collectively influencing the final cost of the bond.

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