Bid Bond
A bond submitted along with a bid, guaranteeing that if the contractor wins the project, they'll actually sign the contract and provide the required performance and payment bonds, with the bonding company covering the owner's added cost if the winning bidder backs out.
Why it matters
An owner who awards a contract based on a bid needs some protection if that bidder gets cold feet or can't actually perform: re-bidding a project costs time and often money, since the next-lowest bid is rarely as low. A bid bond puts a real financial guarantee behind every submitted bid.
On a real project
A contractor's bid bond is written for 5% of their bid amount. After winning the job, the contractor decides the number was too aggressive and tries to walk away: the bonding company has to cover the difference between that bid and the next-lowest bidder's price, up to the bond amount.
Who this matters most to
An Estimator arranges the bid bond as part of assembling the bid package, since most solicitations require one before a bid will even be considered. A Contracts Administrator tracks bonding capacity across active bids, since a contractor's bonding company will only support so much bid exposure at once.
Where this goes wrong
A contractor submits several large bids in the same month without checking their total bonding capacity first. One bid comes in low and needs to be honored, but the bonding company won't issue the performance bond required to actually sign the contract, because the contractor's remaining capacity is already committed to other pending bids.