Bid bond – Mingkem http://mingkem.com/ Thu, 30 Sep 2021 11:28:05 +0000 en-US hourly 1 https://wordpress.org/?v=5.8 https://mingkem.com/wp-content/uploads/2021/10/icon-7-120x120.png Bid bond – Mingkem http://mingkem.com/ 32 32 Bid bond https://mingkem.com/bid-bond/ https://mingkem.com/bid-bond/#respond Fri, 30 Oct 2020 07:00:00 +0000 https://mingkem.com/bid-bond/ What is a bid bond? A bid bond guarantees compensation to the bond owner if the bidder does not start a project. Bid bonds are often used for construction work or other projects with selection processes based on similar offers. The function of the bid bond is to provide a guarantee to the project owner […]]]>

What is a bid bond?

A bid bond guarantees compensation to the bond owner if the bidder does not start a project. Bid bonds are often used for construction work or other projects with selection processes based on similar offers.

The function of the bid bond is to provide a guarantee to the project owner that the bidder will complete the work if selected. The existence of a bid bond gives the owner assurance that the bidder has the financial means to accept the work for the price stated in the bid.

Key points to remember

  • A bid bond is a legal agreement that ensures that contractors meet their stated obligations on a project.
  • This form of insurance provides both financial and legal recourse to the project owner.
  • Bid bonds are usually presented in conjunction with the project contract.
  • Bid bonds are guaranteed by specialized bonding companies that guarantee that payments will be made if the contractor does not meet his end of the bargain.
  • The other main types of construction bonds are performance and payment bonds.

Understanding Bid Bonds

Bid bonds ensure that contractors can comply with bid contracts and will fulfill their professional responsibilities at agreed prices. Most public construction contracts require contractors or sub-contractors to guarantee their bids by providing bonds which serve as a means of legal and financial protection for the client.

Without bid bonds, project owners would have no way of guaranteeing that the bidder they select for a project will be able to complete the job properly. For example, an underfunded bidder may encounter cash flow issues along the way. Bid bonds also help clients avoid frivolous offers, which saves time in analyzing and choosing contractors.

Bid Bond Requirements

While most project owners typically charge 5-10% of the bid price as a penalty, federally funded projects require 20% of the bid. The cost of the bond depends on several factors, including the jurisdiction of the project works, the amount of the bid and the contractual conditions.

For example, a contractor who submits a bid of $ 250,000 to provide a roof for an elementary school will need to submit a bid bond of $ 50,000. This bid bond is required with a proposal to be taken seriously as a candidate for a federal contract.

Drafting of a bid bond

A bid bond may be a written guarantee established by a third party guarantor and given to a client or to a contracting authority. The bid bond certifies that the contractor has the necessary funds to carry out the project.

Typically, bid bonds are issued as a cash deposit by contractors for a bid. A contractor purchases a bond from a bond’s submission, which performs extensive financial and background checks on a contractor before approving the bond.

Several factors determine whether a contractor will receive a bid bond. They include the company’s credit history and the number of years of experience in the field. Financial statements can also be examined to determine the overall financial health of the business.

The parties involved

A surety involves three main actors: the financial guarantor or surety of a construction bond, guaranteeing the creditor that the contractor (called the principal) will act in accordance with the conditions established by the bond.

  • The creditor is the owner of the project who engages the contractor and asks for the bond. This person or other entity sets the terms and conditions of the bond and will file a claim if the contractor fails to perform or breaches the contract.
  • The main is the contractor who buys the deposit. If the contractor does not perform, he will be liable on the basis of the terms and conditions set out in the contract and the bond.
  • Surety companies assess the financial merits of the prime builder and charge a premium based on its calculated probability of an adverse event occurring.

Both the surety and the contractor are liable if the contractor does not comply with any of the conditions of the contract.

Bidding bonds vs performance bonds

A bid bond is replaced by a performance bond when an offer is accepted and the contractor begins work on the project.

A performance bond protects a client against a contractor’s failure to perform in accordance with contractual conditions. If the work done by a contractor is poor or faulty, a project owner can make a performance bond claim. The bond provides compensation for the cost of redoing or correcting the work.

Non-compliance with obligations

If the contractor does not respect the obligations of the bid bond, the contractor and the surety are jointly and severally liable for the bond. A client will usually go for the lowest bidder as this will mean lower costs for the business.

If a contractor wins the bid but decides not to perform the contract for some reason, the client will be obligated to award the contract to the second lowest bidder and pay more. In this case, the contracting authority can claim the total or partial amount of the tender deposit. A bid bond is therefore an indemnity bond that protects a client if a successful bidder does not perform the contract or provide the required performance bonds.

Third party liability

The amount claimed against a bid bond usually covers the difference between the lowest bid and the next lowest bid. This difference will be paid by the surety or surety company, who can sue the contractor to recover the costs. Whether the surety can sue the contractor depends on the terms of the bid bond.

Frequently Asked Questions

What is a contract offer?

A contract offer is most often associated with a proposal and price submitted by a contractor or service provider to a solicitation firm for a business opportunity involving construction or renovation projects.

Can you get a bid bond with low credit?

While it is always helpful to have good credit in business like these, those with bad credit can still get bid bonds from companies that agree to do so, but these will often be more. expensive to obtain.

Are bid bonds returned?

Once a project is successfully completed in accordance with the contract, the amount of the bid bond is returned.

What are the 3 main types of construction bonds?

The three main types of construction bonds are offer, performance and payment.


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Sidian Bank Expands Trade Finance Market, Unveils Online Bond Submission Platform https://mingkem.com/sidian-bank-expands-trade-finance-market-unveils-online-bond-submission-platform/ https://mingkem.com/sidian-bank-expands-trade-finance-market-unveils-online-bond-submission-platform/#respond Fri, 23 Oct 2020 07:00:00 +0000 https://mingkem.com/sidian-bank-expands-trade-finance-market-unveils-online-bond-submission-platform/ NAIROBI, KENYA: Sidian Bank has launched a web application that allows customers to generate bid bonds from anywhere on any device. The self-service platform named Sidian Credible aims to improve convenience, efficiency and speed of execution, which are essential for tenders. Trade finance has been one of the areas of intervention of Banque Sidian over […]]]>

NAIROBI, KENYA: Sidian Bank has launched a web application that allows customers to generate bid bonds from anywhere on any device.

The self-service platform named Sidian Credible aims to improve convenience, efficiency and speed of execution, which are essential for tenders.

Trade finance has been one of the areas of intervention of Banque Sidian over the past five years.

“Through tailor-made trade finance solutions, the bank has seen many of its clients unlock their business potential, which has led to the timely application of bid bonds and cost savings, while ‘others have spread wings across the African region, ”said Corporate Banking and Trade Finance Director Beatrice Kamiri.

The solution moves away from the manual process of securing bid bonds and embraces technology as the next big frontier. In addition to meeting customer needs, the app aims to align with the government’s initiative and vision of e-procurement.

“We are very grateful to our clients for giving us the opportunity to serve them and assist in the turnaround of their businesses. This product is a victory for us together, ”said Chege Thumbi, CEO of Sidian Bank.


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Sidian Bank launches online submission platform to expand its trade finance market https://mingkem.com/sidian-bank-launches-online-submission-platform-to-expand-its-trade-finance-market/ https://mingkem.com/sidian-bank-launches-online-submission-platform-to-expand-its-trade-finance-market/#respond Fri, 23 Oct 2020 07:00:00 +0000 https://mingkem.com/sidian-bank-launches-online-submission-platform-to-expand-its-trade-finance-market/ Sidian Bank has launched a new product that allows existing and potential Bank customers to generate bid bonds from anywhere, anytime and on any device. The solution dubbed Sidian Credible, a safe and secure web application, is a self-service platform that conveniently meets customer needs in any tendering process. Banque Sidian entered the Trade Finance […]]]>

Sidian Bank has launched a new product that allows existing and potential Bank customers to generate bid bonds from anywhere, anytime and on any device.

The solution dubbed Sidian Credible, a safe and secure web application, is a self-service platform that conveniently meets customer needs in any tendering process.

Banque Sidian entered the Trade Finance space five years ago, making it one of the Bank’s areas of intervention.

“Through tailor-made trade finance solutions, the Bank has seen many of its clients unlock their business potential, resulting in the timely application of bid bonds and cost savings, resulting in has resulted in tremendous growth in profitability, while others have spread wings across the African region, ”observed Head-Corporate Banking & Trade Finance, Beatrice Kamiri.

The Sidian Credible platform aims to provide customers with choice and convenience. The solution moves away from the manual process of securing bid bonds and embraces technology as the next big frontier.

In addition to meeting customer needs, the app aims to align with the government’s initiative and vision of e-procurement.

Speaking at the launch of the new solution, Bank Commercial Director Tim Gitonga said: “The product launch is therefore a new dawn and a new experience for our Sidian Bank clients as well as our potential clients.

This was the result of a fundamental overhaul and a radical overhaul of current processes, putting the customer’s need for efficiency and timely solutions first. The solution is also in line with the Bank’s overhaul to reduce physical contact in accordance with Covid-19 control measures. “

Reflecting on the growth of Sidian Bank in general, and in particular with regard to trade finance solutions, Sidian Bank Managing Director, Chege Thumbi noted that “Sidian Credible is a milestone for us and the solution sets us apart. truly as leaders / frontiers in the Trade Finance Space.

He added, “The product we are launching today therefore goes a long way in affirming this position and demonstrating our commitment to sustaining this growth trajectory as we grow with our corporate clients. We are very grateful to our clients for giving us the opportunity to serve them and assist in the turnaround of their businesses. This product is a victory for us together.

The authenticity of the generated bid bonds is validated by a QR code integrated into the guarantee. In addition, bid bonds are self-signed by authorized signing officers of the Bank. The platform is accessible to Sidian and non-Sidian customers.

For the latter, the system has the ability to self-integrate and generate a bid bond. The self-onboarding process for non-Sidian customers involves automatic and instant verification of entered customer information against credible sources made available to the banking industry by the Government of Kenya.

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Words and figures: the contractor loses the bid bond when he mistakenly omits the word “thousand” | Burr & Forman https://mingkem.com/words-and-figures-the-contractor-loses-the-bid-bond-when-he-mistakenly-omits-the-word-thousand-burr-forman/ https://mingkem.com/words-and-figures-the-contractor-loses-the-bid-bond-when-he-mistakenly-omits-the-word-thousand-burr-forman/#respond Tue, 22 May 2018 07:00:00 +0000 https://mingkem.com/words-and-figures-the-contractor-loses-the-bid-bond-when-he-mistakenly-omits-the-word-thousand-burr-forman/ Entrepreneurs make mistakes with words. Entrepreneurs make mistakes with the numbers. And sometimes a mistake with the words leads to a mistake with the numbers. In Clark Construction Co. v. Alabama Highway Department, a road contractor tried to withdraw his bid on a public market and have his bid bond returned after making a mistake […]]]>

Entrepreneurs make mistakes with words. Entrepreneurs make mistakes with the numbers. And sometimes a mistake with the words leads to a mistake with the numbers.

In Clark Construction Co. v. Alabama Highway Department, a road contractor tried to withdraw his bid on a public market and have his bid bond returned after making a mistake on his written proposal. In its bid for a bridge construction project in Mobile County, the contractor had indicated a total amount of $ 1,119,609. On a particular item for the steel bridge superstructure, the contractor indicated the amount of “$ 368,000” in numerical value, but had the words “Three hundred and sixty-eight” immediately before the word “dollars”. The contractor mistakenly omitted the word “thousand” from their written submission.

During the review of the bids, the Alabama Highway Department used the written words to calculate the total bid, as required by law. Section 39-2-7 of the Alabama Code provided: “In the event of a discrepancy between the prices indicated in the numbers and in the words, the words shall prevail. The Department determined that the contractor’s bid was $ 816,977.60, as opposed to the $ 1,119,609 that the contractor intended to submit.

After learning of the error, the contractor requested permission to withdraw its bid based on the error, but the Department refused to allow the bid to be withdrawn. The contractor then refused to accept the work and the Department therefore lost the contractor’s bid bond of $ 10,000. The court of first instance ruled in favor of the Department.

The appeals court upheld the ruling, ruling that the “words over numbers” law should be interpreted strictly. In light of the potential damage that the contractor could have lost due to his error, the forfeiture of the bond (which was also required by law) was not excessive and otherwise fair.

Clark Construction is a good reminder to public contractors to pay particular attention to the tabulations of the offers. If there are errors in your written proposal, understand that the RFP or applicable law will control how the error is to be resolved.

[View source.]


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No need to extend the tender deposit if it is not requested https://mingkem.com/no-need-to-extend-the-tender-deposit-if-it-is-not-requested/ https://mingkem.com/no-need-to-extend-the-tender-deposit-if-it-is-not-requested/#respond Fri, 24 Jul 2015 07:00:00 +0000 https://mingkem.com/no-need-to-extend-the-tender-deposit-if-it-is-not-requested/ The judgment was delivered by the Court of Appeal chaired by Chief Justice Silvio Camilleri, together with Judge Giannino Caruana Demajo and Judge Noel Cuschieri on July 13, 2015 in a Power Cables Malaysia SDN BHD -v- Enemalta Corporation case, Contracts Director General, Télé-Fonika Kable SA. In its appeal, Power Cables Malaysia ruled that the […]]]>

The judgment was delivered by the Court of Appeal chaired by Chief Justice Silvio Camilleri, together with Judge Giannino Caruana Demajo and Judge Noel Cuschieri on July 13, 2015 in a Power Cables Malaysia SDN BHD -v- Enemalta Corporation case, Contracts Director General, Télé-Fonika Kable SA.

In its appeal, Power Cables Malaysia ruled that the Public Contracts Review Board had dismissed its appeal from a decision regarding a contract for the supply of an 11 kV three-conductor cable. This contract was awarded to Télé-Fonika Cable.

The call for tenders was issued by Enemalta Corporation and one of the conditions was to present a tender guarantee of € 41,000, valid until October 17, 2014. However, the award of the tender went to – beyond that date.

The appellant company extended the bid bond. On October 24, 2014, the appellant company asked if its competitors were doing the same and extended the bid bond. No response was sent. Subsequently, they were informed of the contract award to Tele-Fonika and, on January 15, 2015, the appellant company filed its opposition with the Revision Committee, asking it “to examine whether the bid bond provided by the recommended bidder had been duly extended in the terms of the tender before October 17, 2011. If the bid bond has not been extended under the tender, it is submitted that the offer of the recommended tenderer and of any other tenderer who did not extend his bid bond, moreover, should be rejected ”.

The appellant company complained about the amount it had to deposit in order to be able to file this opposition.

On March 27, 2015, the Review Board dismissed the complaint and argued that the contracting authority may have requested an extension of the bid bond, but failed to do so. This was part of a change in the Contracts Department’s policy regarding the extension of bid bonds, so as not to increase the financial burden on bidding companies. Enemalta argued that she should have known and could have asked for clarification.

The appellant company then appealed the decisions of the Review Board, stating that a valid bid bond is a legal requirement and that the other bidders did not have one at the time of the award. However, although the Procurement Department may exempt bidders from submitting a bid bond, in this particular case it was required. In addition, the company noted the fact that there had been no clarification on this point and that consequently, it should not lose its deposit which it had paid to file this claim.

The Court of Appeal referred to the first ground of appeal, in which the appellant company argued that the offer would not remain valid when the bid bond is itself no longer valid. The company argued that it didn’t make sense to ask for a bid bond which, halfway, would fail.

This principle has been retained in previous judgments, such as Salvastore Mifsud -v- Kunsill Lokali, Sliema, where the bidder did not extend the bid bond and therefore lost his judicial interest in the appeal process. offers.

The Court of Appeal ruled that contrary to the examples given, in this particular call for tenders, an extension of the bid bond was not requested and, therefore, anyone who did not extend the bid bond could not be penalized. in any way. The case could have been different if the tender had not been awarded because of the bidder, as in the case of Mifsud cited above, where the bidder appealed, stopping the whole process.

At the same time, the Court agreed with the appellant company that, as it stands, the bid bond is unnecessary, as a bid bond is required at the start and should remain valid throughout the process. Notwithstanding this, the contracting authority was free to set these conditions which should not penalize the offers which followed these conditions.

With respect to the second ground of appeal, that it was not true that there had been a change in policy, that there was no need to extend the bid bond when the auction did not take not over time, the court noted that the appellant company had extended the bid bond by choice and not because the department requested it. In fact, the tender guidelines did not mention this extension. The fact that there was uncertainty did not help their cause, because if there had been doubt and uncertainty, it should not have affected the validity of competitor’s offers.

The third ground of appeal concerned the fact that the Review Board ordered that the appellant company lose its deposit. The appellant company argued that courts and tribunals do not usually penalize the appellant when it follows that the authorities have placed the appellant in a situation where he must appeal. The Court agreed with this argument, in that if the standard was for bidders to extend their bid bond, and this had changed, this should have been clearly communicated. Therefore, the Director of Contracts contributed to this situation.

The Court of Appeal then allowed the appeal, limited to reimbursement of the deposit made, but dismissed the remainder of the appeal.

Malcolm Mifsud, Partner, Mifsud & Mifsud Advocates


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