What Is a Bid Bond: Purpose and Use

By Kristi Waterworth – Updated Dec 5, 2024 at 4:19 PM

Key Points

Bid bonds ensure project completion by guaranteeing funds and screening potential bidders.
A bid bond transitions to a performance bond if the bidder wins, securing work quality.
The Miller Act mandates contractors to secure bonds for federal projects over $100,000.

Whether you're a contractor bidding on a job or a person who is handling contractor bids, understanding bid bonds and their purpose in the construction ecosystem is vital. While they may not have a huge influence on investors, they do make a massive impact on the industry as a whole. Read on to learn more.

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Industrial facility being built. — Image source: Getty Images.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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