Bid Bond

A Bid Bond is a written guarantee issued by a bank at the request of a bidder to the tenderer, promising that if the bidder withdraws its bid during the bid validity period, refuses to sign the contract after winning the bid, or refuses to submit a performance bond, the bank will compensate the tenderer within the bond amount. It is mainly used in international engineering contracting, bulk cargo procurement, and other tendering scenarios, with the amount typically 1%-5% of the bid price. Notes: The bond validity should cover the bid validity period plus an additional 30 days; the compensation conditions must be clearly stated (on-demand or conditional); the bond should be cancelled promptly upon expiry to release credit lines. Difference from a performance bond: A bid bond applies to the bidding stage and guarantees compliance of the bidding conduct; a performance bond applies to contract performance after winning the bid and has a higher amount (typically 10%-15%). Difference from a standby letter of credit: Bid bonds are mostly governed by URDG758, while standby letters of credit are governed by ISP98 or UCP600, but their functions are similar.