Bid Bond

A bid bond protects the buyer against a supplier who wins and then declines to sign. If that happens, the buyer can claim against the bond to cover the cost of going to the next bidder.

Bid bonds are common on construction and larger goods contracts. They are obtained from a surety or bank, and the capacity to obtain them is itself a constraint — a supplier's bonding limit effectively caps the size of contract it can pursue, independent of its ability to do the work.