Who Needs Them?

In Michigan, a bid bond (or certified check or money order) is required from contractors submitting a bid for any state-funded construction project expected to exceed $50,000. Most contractors prefer not to tie up their cash and choose to provide bid security in the form of a bid bond. The bid bond must be equal to 5% of the bid price. 

Many private project owners also require bid bonds as financial protection for themselves and any investors, particularly for larger construction projects.

How Much Do They Cost?

In Michigan, the project owner, who serves as the obligee for the bid bond, plays a key role in setting the required bond amount. Typically, this amount is established at 5%-10% of the total bid for the project. 

When it comes to underwriting for various projects, the primary consideration is the contractor's personal credit history. For smaller contracts and enterprises, this aspect takes center stage. However, for larger and more complex projects, the underwriters of the assurance delve deeper into their assessment. They analyze factors such as the project's location, the contractor's financial stability, and their overall creditworthiness. This meticulous evaluation helps determine the final cost.

Bid bonds are provided free of charge by Surety Bond Professionals, with the understanding that if the contractor is awarded the contract, they will proceed to secure Performance and Payment (P&P) bonds through the surety to advance with the project.