Pennsylvania Bid Bonds

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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 Pennsylvania Bid Bonds?

A Pennsylvania bid bond is a form of bid security that serves as a contractor’s guarantee that:

  • The bid submitted is complete and accurate,
  • The contractor will be able to furnish performance and payment bonds if awarded the job,
  • And the contractor will accept the job if chosen as the winning bidder.

The bid bond protects the project owner (the bond’s “obligee”) from financial losses if the winning bidder (the bond’s “principal”) doesn’t live up to that guarantee. When that is the case, the principal is legally obligated to compensate the obligee for the resulting monetary damages.

Who Needs Them?

Pennsylvania’s statutes give the commonwealth’s contracting authorities broad discretion in deciding whether or not to require bid security for a particular construction project. If a bid bond will be required, it will be announced in the bid advertisement. Private project owners also may require bid bonds to protect themselves and their investors.

How Do Pennsylvania Bid Bonds Work?

A Pennsylvania bid bond involves three parties: the obligee, the principal, and the bond’s guarantor (known as the “surety”). As the guarantor, the surety typically pays the obligee directly to ensure a timely resolution. But that doesn’t change the principal’s legal obligation to pay a valid claim. In paying the claim initially, the surety was extending credit to the principal, which creates a debt that the principal must repay in accordance with the surety’s credit terms. Not doing so is likely to result in the principal being sued by the surety to recover the debt.

How Much Do They Cost?

In Pennsylvania, bid bond costs are determined by the project owner, who serves as the obligee for the bid bond. Typically, the required bond amount is set at 5% or 10% of the total bid amount, depending on the specific project.

At Surety Bond Professionals, we provide bid bonds to contractors at no charge. It’s important to note that these bid bonds are usually 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.

When underwriting for smaller contracts and enterprises in Pennsylvania, 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.

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