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 performance bond needs.
What Are New York Bid Bonds?
New York contractors competing with other contractors for a job through a competitive bidding process may be required to furnish the project owner with a bid bond as a guarantee that:
- The bid submitted is complete and accurate,
- The contractor qualifies for performance and payment bonds, or
- If chosen as the winning bidder, the contractor (the bond’s “principal”) will accept the job and enter into a contract with the project owner (known as the bond’s “obligee”).
A principal who does not live up to this guarantee is legally obligated to compensate the injured party, the obligee, for monetary damages.
Who Needs Them?
Bid bonds may be required in a competitive bidding situation. In the case of state-sponsored or local public works projects, bid bonds usually come into play when the estimated value of a project exceeds a certain threshold. The required amount of a bid bond generally is equal to 5% to 10% of the total bid price.
How Do New York Bid Bonds Work?
There are three parties to a New York bid bond: the obligee, the principal, and a third party—the bond’s guarantor (the “surety”). Although the legal obligation to pay a valid claim from the obligee belongs to the principal alone, the surety guarantees its payment. In fact, the surety will pay the claim initially, as an extension of credit to the principal. The principal is left owing that amount to the surety. Failing
to repay the debt according to the surety’s credit terms is likely to result in the principal being sued to recover the funds.
How Much Do They Cost?
The required bond amount is set by the project owner, who is also the obligee for the New York bid bond. Typically, this represents 5% or 10% of the overall bid sum.
Surety Bond Professionals offers bid bonds at no cost. These bonds are typically given with the idea that you will pay the surety for P&P bonds in order to proceed with the project if you are granted the contract.
The contractor’s personal credit history is the main factor taken into account when underwriting smaller contracts and ventures. For larger projects, the location of the project and the stability and creditworthiness of the contractor may be further looked into by the assurance’s underwriters to determine the ultimate cost.
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