A "bid bond" is an agreement between a bidder and owner that ensures the bidder will meet and fulfill the requirements of the project. The bond also protects the owner from any financial losses if the project is not completed as required. This contract is essential, since a legally binding bid contract is difficult to enforce and may take years to resolve. When a contractor fails to complete a project and does not honor the bid bond, the bond owner can file a claim for compensation. Each state regulates bid bonds and the process for filing a claim against a bond.Bid bonds are typically required for larger projects, including highway construction and large public works projects. The amount of the bond varies depending on the value of the project, but is usually between five and seven percent of the total contract value. The owner can also require a performance bond as well.Public works construction in the United States is handled by federal, state and local governments as well as private companies.Public works projects are financed by governments through tax revenues, bonds and loans. Tax revenues finance most public works projects in the United States in order to avoid increasing public debt. The federal government provides state and local governments with financial assistance for numerous public works construction projects.
