What is "bid bond"

A bid bond is issued as part of a supply bidding process by the contractor to the project owner, to attempt to guarantee that the winning bidder will undertake the contract under the terms at which they bid.

The cash deposit is subject to full or partial forfeiture if the winning contractor fails to either execute the contract or provide the required performance and/or payment bonds. The bid bond assures and guarantees that should the bidder be successful, the bidder will execute the contract and provide the required surety bonds.