Massachusetts Bid Bonds

Massachusetts 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 Massachusetts Bid Bonds?

Project owners who require a Massachusetts bid bond do so because they want a guarantee from bidders on construction projects that:

  • the contractor’s bid is accurate,
  • the contractor is approved to purchase any necessary performance and payment bonds if awarded the job,
  • the contractor will enter into the construction contract if chosen as the winning bidder.

Additionally, requiring bid bonds discourages contractors from submitting frivolous bids.

When a bidder violates the terms of a bid bond, the project owner can submit a claim and be compensated for any monetary damages.

Who Needs Them?

The state of Massachusetts requires a bid deposit in the form of a bid bond or other type of security from contractors competing for certain government-funded construction jobs. The required bid deposit amount generally is 5% of the value of the bid. It’s also becoming more and more common for private project owners to require bid bonds from contractors bidding on larger jobs.

How Do Massachusetts Bid Bonds Work?

The three parties to a Massachusetts bid bond are referred to as:

  • the obligee – the project owner requiring the bond,
  • the principal – the contractor purchasing the bond, and
  • the surety – the bond’s guarantor.

While the principal is legally obligated to pay a valid claim, the surety has guaranteed payment. So the surety pays the claim initially–as an extension of credit to the principal. The principal must then repay the resulting debt to the surety. Not repaying the debt can cause the surety to take legal action against the principal to recover the funds.

How Much Do They Cost?

In Massachusetts, the determination of the required bid bond amount rests with the project owner, who acts as the obligee. Typically, this amount equates to 5% or 10% of the total bid for the project. At Surety Bond Professionals, we offer bid bonds at no cost to contractors. These bonds are issued with the understanding that, if awarded the contract, you will proceed to secure Performance and Payment (P&P) bonds through our surety, enabling you to move forward with the project.

The underwriting process for bid bonds in Massachusetts is tailored to the specific project's size and complexity. For smaller contracts and enterprises, the primary focus is on evaluating the contractor's personal credit history. However, when dealing with more substantial projects, underwriters delve into factors such as the project's location, the contractor's financial stability, and their overall creditworthiness.

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