Kentucky Bid Bonds

Kentucky 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 Kentucky Bid Bonds?

Kentucky bid bonds protect construction project owners against any monetary loss caused by a contractor who:

  • submits a winning bid that is later found to be inaccurate or unrealistic,
  • cannot qualify for the performance and payment bonds required from the winning bidder, or
  • does not accept the job and enter into a contract to complete it.

A bid bond guarantees that none of these situations will arise. If the contractor (known as the bond’s principal) fails to live up to that guarantee, the bid bond provides a way to compensate the project owner (the obligee) for any resulting financial harm. 

Who Needs Them?

Kentucky requires bid bonds for all competitive sealed bidding for state-funded construction contracts estimated by the contracting authority to be valued in excess of $40,000. Many private project owners also require bid bonds.

How Do Kentucky Bid Bonds Work?

Every Kentucky bid bond is a legally binding contract between the obligee, the principal, and a third party—the bond’s guarantor (referred to as 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. The principal must subsequently repay the resulting debt to the surety. Failing to do so can lead to the surety suing the principal to recover the funds. 

How Much Do They Cost?

In Kentucky, the cost of bid bonds is an important consideration when bidding on construction projects. The obligee, who is the project owner, determines the required bond amount, which is typically set at either 5% or 10% of the total bid amount for the project.

The cost of bonds in Kentucky is influenced by various factors. For smaller contracts and businesses, the primary consideration is typically the contractor's personal credit history. However, for larger and more complex projects, our underwriters conduct a more thorough evaluation. This evaluation may involve an in-depth analysis of the project's location, the contractor's financial stability, and their overall creditworthiness. All of these elements contribute to determining the final cost of the bond.

At Surety Bond Professionals, we provide bid bonds to contractors in Kentucky at no cost. It's important to understand that these bid bonds are generally issued with the understanding that if the contractor is awarded the project, they will proceed to purchase the necessary Performance and Payment (P&P) bonds through our surety in order to move forward with the construction work.

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