Bid Bonds And Contractors: What You Should Know
When you are ready to place your bid for a construction job, you can be faced with a bid bond. This is a type of bond which provides the owner of the job with protection. Before you place your bid, you need to understand what bid bonds are and how they work:
What is a Bid Bond?
Bid bonds are a surety bond. This is a type of agreement among three parties who are working within the scope of the project. The parties will include a contractor, the person or business who owns the project, and the bonding company. The bid bond ensures the contractor keeps his or her end of the deal. This will hold you to your bid and prevent you from backing out, leaving the owner up in the air with no contractor. The bond will put your bid amount in writing, meaning you cannot change your costs later in the project.
How Are Bid Bonds Protective?
When you sign a bid bond, you as the contractor will be held liable for a certain amount of money if you violate the agreement. If you do violate the agreement, the project owner may file a claim against your bond. You will then have to pay the bond company the money you put down for the bond when you made the agreement.
How Can You Avoid a Bond Claim?
You do not want to have a claim against your bond, as it will be expensive and can cost you the project. In addition to losing money for the claim, you will also endure a bad reputation. With the amount of competition in the field of contracting, a bond claim can be a major downfall. It will cause project owners and subcontractor to avoid your bids and refuse to work with you.
If you want to avoid a bond claim, you should never place a bid in an amount that is more than what you believe the project will cost. You have to be very precise when you are calculating your bid and avoid any errors. Do not use any information from a source outside the scope of the project. Should something happen that causes a claim and you do not believe the claim is a result of your actions, you can avoid a claim as long as you can prove it. If you believe a claim is made against you in vain or if you are treated improperly during the bidding process, be sure to contact professionals like Wright, Ponsoldt & Lozeau, Trial Attorneys.