Bid Bond vs Performance Bond

A bid bond protects the buyer if a bidder wins and walks away; a performance bond protects the buyer if the awarded supplier fails to perform the contract.

Bid bond — the competition stage

Submitted with the bid (often 10% of bid value). If the bidder refuses to sign the contract or provide final security, the buyer claims the bond to re-tender or award to the next bidder. It filters non-serious bids.

Performance bond — the delivery stage

Issued at contract signing (commonly 50%–100% of contract value depending on the buyer). It backs actual performance: if the supplier defaults, the surety completes or compensates. Labour and material payment bonds often accompany it.

The sequence for a vendor

Bid bond with the submission → contract award → bid bond released once the performance bond (and insurance) is in place. Sureties price on your financials and track record; a strong bid history lowers the cost of both.

Common questions

Do all tenders require bonds?

No — construction and service contracts above thresholds typically do; goods supply often requires none. The tender document states the requirement exactly.

What do bonds cost?

Bid bonds are usually low-cost (or free against a facility); performance bonds run a small percentage of contract value annually, set by the surety.