What is a Texas Construction Bid Bond for Public Work Projects?

Need to bid on your dream construction project in Texas? Learn about one of the major requirements!

Texas Construction Bid BondFirst, we need to define what a Texas Construction Bid Bond for Public Work Projects is. Like all other bonds, the Bid Bond – also known as Proposal Bond – will act as a guarantee to the governmental entity that the contractor will obtain the necessary bonds (Performance Bond and Payment or Labor and Material Bonds) in order to complete the public construction project.

 

Scenario

For example, the Austin Public Works Department asks a couple of contractors to submit a proposal or bid to create a new bridge in Austin. The bidders will be asked to send their proposals along with the necessary bid bonds obtained from a surety bond company that is licensed to conduct such in the state.

The bid bond will then be between these three:

  • Principal – Construction Company
  • Obligee – Austin Public Works Department
  • Surety – surety bond company

Five construction firms submitted a bid for the said bridge. The bid includes the project’s cost estimate, material take offs, etc.  Out of the five, A. Powers Builders won. As a general requirement, A. Powers Builders will now have to get a Performance Bond plus Payment or Labor and Material Bonds before the construction of the bridge starts.

  1. Powers Builders refused to get the required bonds, and decided to withdraw from the project all together; a clear violation of the bid bond.

Because of this, Austin Public Works Department filed for damages. A. Powers and the surety bond company, individually or separately, will now pay for those damages at the bond’s full value.

 

The Necessary Bonds

We mentioned above that the Bid Bond is one way to ensure that the contractor will purchase the necessary bonds. These are the following:

  • Performance Bond – is a way to ensure the governmental entity that the contractor will finish the contract and abide by the price agreed upon.
  • Payment or Labor and Material Bonds – to protect the people or entities that are directly part of the project through the contractor or a subcontractor by supplying either labor or project materials.

 

How much do Bid Bonds cost?

The amount of the bond will depend on the cost of the project, the type of project, the contractor’s credentials, and other state provisions. Some can go as little as 1% of the project’s cost, while others can go as high as 20%. If you want to know yours right now, get in touch with one of our expert bond agents for a FREE quote!

OR

You can start obtaining your Texas Construction Bid Bond for Public Work Projects by having one of our underwriters assess your credentials. We secure bonds regardless of credit standing. Call now!

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