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 Ohio Bid Bonds?
An Ohio bid bond is a surety bond that a contractor must furnish along with a bid on a construction project to be awarded through competitive bidding. The bond serves as the contractor’s guarantee that:
- The bid submitted is complete and accurate,
- The contractor is able to purchase performance and payment bonds if needed, and
- The contractor will enter into a contract with the project owner if chosen as the winning bidder.
The intent is to protect the project owner (the bond’s “obligee”) against financial losses that can occur if proceeding to award the contract to the winning contractor (the “principal”) is not an option. A principal that fails to live up to the guarantee is legally obligated to compensate the obligee for monetary damages incurred as a result.
Who Needs Them?
Ohio’s “Little Miller Act” is one of the few state versions of the federal Miller Act that mandate a bid bond from any contractor bidding on a public works project. The required bond amount ranges from 5% to 20% of the bid price.
How Do Ohio Bid Bonds Work?
There is a third party to an Ohio bid bond—the bond’s guarantor (called the “surety”). At the time the bond is purchased, the surety agrees to extend credit to the principal for the purpose of paying a valid claim should the need arise.
To make sure that a claim is resolved quickly, the surety will pay it initially, then turn to the principal for repayment. If the debt is not repaid according to the surety’s credit terms, the surety is likely to take the matter to court to recover the funds.
How Much Do They Cost?
In Ohio, bid bond costs are determined by the project owner, who acts as the obligee for the bid bond. Typically, the required bond amount is set at 5% or 10% of the total bid amount.
When underwriting for smaller contracts and enterprises in Ohio, the primary consideration is the contractor’s personal credit history. However, for larger projects, the underwriters of the assurance may conduct a more comprehensive assessment. This assessment could include a closer look at the project’s location, as well as an evaluation of the contractor’s stability and creditworthiness. These factors are taken into account to determine the final cost of the bid bond.
At Surety Bond Professionals, we provide bid bonds to contractors at no charge. This is because these bid bonds are issued with the understanding that if the contractor is awarded the contract, they will proceed to purchase the required Performance and Payment (P&P) bonds through our surety to move forward with the project.
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