Bid bonds are a way of bidding for a job that a contractor wants. The contractor may be self-employed or be part of a company and is bidding on their behalf. The bid bond process is a way for contractors and project owners to become competitive in the industry. Taking a bid is a serious task for the owner. If they take too low of a bid, the project may be low quality and rushed. If they take too high of a bid, they may lose a lot of money on the project. They also need to research the companies placing a bid and determining if they are the right ones for the project.
What type of companies uses bid bonds?
There are many types of companies that use bid bonds for their projects. One of the most common industries to use the process is construction. Before a project is started, the owner of the project will open bidding for it. The owner puts out general information about the type of project. This information is used by contractors to place their bid for the job. When the contractor places a bid, they are placing a dollar amount bid bond which states how much they will use to complete the project. The contractor has to factor in the time length, the cost of materials, room and board for employees if applicable, and wages for employees.
What happens after the bid is accepted?
Companies from all over the state or even the country can submit bids for private or federal jobs. The more bids the project owner receives, the longer it may take to pick a contractor. The project owner doesn't want to pick a contractor without financial means or a bad reputation because it is unlikely they will finish the job. Once the owner does pick a contractor, they enter into a contract stating that the job will be completed within the specified timeframe and the submitted budget. Failure to do so may result in penalty charges for the contractor, as per the contract specifications. The contract may state that a new contractor can be used if the project deadline passes by a certain amount of time.
Conclusion
Bid bonds don't have to be used by companies only. You can ask for bids for any project that you have, like remodeling your house or building a garage on your property. Asking for a bid bond and drawing up a contract is just good practice and lowers your risk if they don't complete the job.
Contact a company like Surety Bond Professionals for more information and assistance.
Share1 November 2017
As I see it, one problem with most budgeting programs is that they don't account for the "real life" factor. Anyone can tell you not to spend anything and to save everything, but when it comes to feeding your kids or dealing with a medical emergency, most budgets get thrown out the window. I realized that this was a problem, so I decided to start focusing on budgeting for real life. I decided to forget everything that I knew about budgeting and started working with a clean slate. This blog is all about budgeting for real life and knowing how to spend your money the smart way.
