When California requires a bid bond
On public works, the requirement comes from the agency and the Public Contract Code, not from you. When a state or local agency advertises a project, its instructions to bidders almost always require every bid to arrive with bid security. State contracts set that trigger for work above a modest dollar threshold, and cities, counties, school and community college districts, and special districts follow the same pattern. If the bid documents call for security and your proposal shows up without it, the agency rejects the bid as nonresponsive. There is no appeal on that point.
The 10% rule
California sets bid security at a percentage of your bid, and the standard figure is at least 10% of the amount you bid. You can satisfy it in more than one way, but a bid bond from a surety is the option nearly every contractor uses, because it does not tie up your cash while you wait for the award.
| Form of bid security | Typical amount | Ties up cash? |
|---|---|---|
| Bid bond (admitted surety) | 10% of the bid | No |
| Cashier's check | 10% of the bid | Yes |
| Certified check | 10% of the bid | Yes |
| Cash | 10% of the bid | Yes |
It has to come from an admitted surety
A bid bond only counts if it is written by an admitted surety insurer, meaning a company the California Insurance Commissioner has certified to transact surety business in the state. Agencies verify this, and a bond from a carrier that is not admitted in California will not be accepted. The A-rated markets we place through are all admitted, so this is handled for you when we issue the bond. If you are bidding federal work, a different list applies, the U.S. Treasury Circular 570 list of approved sureties.
What the bid bond actually guarantees
The bid bond backs a promise, not the work itself. It guarantees that if you are awarded the job, you will enter into the contract at your bid price and furnish the required performance and payment bonds. If you win and then cannot or will not do that, the surety pays the obligee the difference between your bid and the next viable bid, up to the penal sum of the bond. That is why underwriters treat the bid bond and the final bonds as one capacity decision: before it backs your bid, the surety is really deciding whether it will stand behind the whole job.
What happens if you win and back out
Failing to execute the contract on time is grounds for the agency to void the award and forfeit your bid security. If you posted a bid bond, the surety is on the hook for the bid spread up to the bond amount, and it will look to you to make it whole under your indemnity agreement. On many public projects a bidder who forfeits its security is also barred from bidding that project again. The lesson: only bid work you are prepared and able to bond and build.
Private projects set their own rules
On private construction, no statute forces a bid bond. Instead, the owner or the general contractor decides whether to require one and writes the terms into the bid documents. Private bid bonds are common on larger commercial jobs and are usually written for 5% to 10% of the bid, mirroring the public works standard. Read the invitation to bid: if it calls for bid security, the amount and form are spelled out there.
What it costs, and how to get one
A bid bond usually carries no separate premium. It is issued on the strength of your bonding program, and the premium sits on the performance and payment bonds you post after award. See how much a bid bond costs for the detail. To get one, a surety needs to establish your bonding capacity: your experience, your financial statements, and your credit. If you are new to public work, start with how to bid public works in California and DIR registration, both of which you need in place before you can bid. When credit or a thin track record makes the capacity hard to place, that is exactly the kind of file we work through our hard-to-place markets. When you are ready, start a quote and we will size the bid bond to the job.