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Bid Bonds: Unlocking Opportunities in Public Tenders
- Valentina Todorova
- Oct 3
- 3 min read
Introduction
Winning a public tender or an international contract is one of the fastest ways for companies to grow. But before contracts are signed, governments and large institutions want to ensure that bidders are serious, capable, and financially reliable.
This is where the Bid Bond—also known as a Tender Guarantee—becomes essential.
At Credit Glorious, we issue bid bonds that give our clients the credibility to compete globally, while offering project owners the protection they require.
What Is a Bid Bond?
A Bid Bond is a financial guarantee issued by a bank or financial institution on behalf of a bidder. It ensures that if the bidder wins the tender, they will sign the contract and provide the required performance bond.
If the bidder refuses or fails to honor the bid, the beneficiary (usually the project owner or contracting authority) can claim compensation from the bid bond.
👉 In practice: A construction company bidding for a government project must present a bid bond equal to 2–5% of the tender value. If they win but fail to sign, the contracting authority is compensated.
Why Are Bid Bonds Important?
Bid bonds serve two critical functions:
For project owners: They protect against frivolous or unserious bids, ensuring only credible participants.
For bidders: They provide the financial credibility needed to compete in large tenders and international procurements.
Without a bid bond, most companies are not even eligible to submit offers.
How Bid Bonds Work in Public Tenders
Tender requirement – The contracting authority requires a bid bond as part of the tender documentation.
Issuance – The bidder applies to Credit Glorious, which structures and issues the bid bond.
Submission – The bond is submitted with the bid.
Contract award – If the bidder wins and signs, the bid bond expires or is replaced by a performance bond.
Default – If the bidder refuses to sign, the contracting authority claims the bond.
Bid Bond vs Performance Bond
While both are guarantees, they serve different purposes:
Aspect | Bid Bond | Performance Bond |
Stage | Tender stage | Post-award, during contract execution |
Purpose | Ensures bidder signs contract if awarded | Ensures contractor completes project as agreed |
Typical Value | 2–5% of tender value | 10–30% of contract value |
Duration | Valid until contract signing | Valid until project completion |
👉 In many projects, both are required: the bid bond at tender submission, and the performance bond after award.
Global Use of Bid Bonds
According to the ICC Trade Register, financial guarantees including bid bonds support trillions of dollars in global transactions annually
Bid bonds are particularly important in:
Construction and civil engineering tenders
Energy and infrastructure projects
Public-private partnerships (PPPs)
International development contracts funded by institutions like the World Bank or the EU
A Client Story: Success with a Bid Bond
Recently, Credit Glorious assisted a client bidding for a major infrastructure contract in Eastern Europe. The tender required a bid bond equal to 3% of the project value.
Our Customer Success Manager worked closely with the client to structure and issue the guarantee in time for submission.
The result?
The client’s bid was accepted as compliant.
They secured credibility with the tender authority.
After winning, they seamlessly transitioned to a performance bond to begin execution.
This case demonstrates how a bid bond can be the gateway to global opportunities.
FAQ: Bid Bonds
What is the typical size of a bid bond? Usually 2–5% of the tender value.
Are bid bonds refundable? Yes. If the bidder complies (signs the contract if awarded), the bond expires without cost to the beneficiary.
Are bid bonds mandatory in international tenders? Yes. Most international tenders, especially government projects, require them.
Conclusion
A Bid Bond is not just a financial instrument—it is the key that opens the door to public tenders and global contracts. By demonstrating seriousness and financial reliability, it allows companies to compete internationally with confidence.
📌 At Credit Glorious, we specialize in structuring bid bonds and tender guarantees that give our clients the credibility to succeed in competitive markets.
