Missouri 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 Missouri Bid Bonds?
A Missouri bid bond is a contractor’s guarantee to a state or local contracting authority or private construction project that:
- The contractor’s bid price is accurate and realistic,
- The contractor (the bid bond’s “principal”) is able to obtain the necessary performance and payment bonds if chosen as the winning bidder, and
- The contractor will enter into a contract with the contracting authority or private project owner (the bond’s “obligee”) if awarded the job.
A bid bond provides a source of funds for compensating the obligee if the principal fails to live up to this guarantee.
Who Needs Them?
Under Missouri’s Revised Statutes, the Department of Transportation and other state agencies use a competitive bidding process to choose contractors for construction projects valued above a certain dollar amount. The required bid bond amount typically is 5-10% of the bid price.
How Do Missouri Bid Bonds Work?
A Missouri bid bond is a legally binding agreement between the three parties to the surety bond agreement: the obligee, the principal, and the bond’s guarantor (called the “surety”). While the principal is legally obligated to pay a valid claim by the obligee, the surety guarantees that payment by agreeing to put up the money and pay the obligee directly on behalf of the principal. The principal must repay the resulting debt in accordance with the surety’s credit terms or face legal action by the surety to recover the funds.
How Much Do They Cost?
We at Surety Bond Professionals provide bid bonds at no cost to Missouri contractors. It's important to remember that these bid bonds are typically provided with the understanding that, should the contractor be chosen as the project's winning bidder, they will then buy the Performance and Payment (P&P) bonds from our surety in order to continue with the construction.
When underwriting smaller contracts and enterprises, the primary consideration is the contractor's personal credit history. When it comes to larger projects, the underwriters of the assurance may further investigate the project's location as well as the contractor's stability and creditworthiness in order to find the final cost. The project owner, who is the obligee for the Missouri bid bond, determines the required bond amount. This usually amounts to 5% or 10% of the total bid amount.
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