Bid Bond

A bid bond is issued to the owner of a project (typically the SPV), as part of a supply bidding process, to provide assurance  that the winning bidder will undertake the contract under the terms at which they bid. The bond is subject to full or partial forfeiture if the winning contractor fails either to 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. Also referred to as a Tender Bond. Lenders to a project SPV will typically insist that such bonds are issued by a bank on behalf of the contractor and that the bond(s) are callable on demand.