Guarantees & surety
Bid & Tender Bond
Short-dated bond confirming that a tender is serious and that the bidder will enter the contract on the terms offered. Usually a small percentage of the tender sum.
Boland’s Quay, Dublin · William Murphy, CC BY-SA 2.0
Who it is for
Bidders for tendered public sector and utility contracts
What it does
- Issued in 24 hours for facility holders with pre-agreed wording
- Typically 1–5% of the tender sum
- Expires on contract award or at the end of the tender validity period
- Rolls into a performance bond on award without re-underwriting
The product in full
A bid bond is the cheapest instrument in the range and the one with the shortest life. It confirms to a procuring authority that a tender is serious: that the bidder has the means and the intention to enter the contract on the terms offered, and will not withdraw its price after the envelopes are opened. If it does withdraw, the authority can call the bond to cover the cost of re-tendering or of accepting the next bid.
Values are small — typically 1% to 5% of the tender sum — and terms are measured in days. What matters operationally is speed. A tender deadline is not negotiable, and a bond that arrives the following week is worthless. For contractors with an agreed facility and pre-approved wording, we issue inside 24 hours.
The useful property is what happens on award. A bid bond written by us rolls into the performance bond for the same contract without re-underwriting, because the credit assessment behind it is the same and is already complete.
Literature
Product literature is issued to appointed intermediaries. Ask your underwriter, or request it through the enquiry form.
- Bid bond wordingOn request
- Facility application formOn request
How it works
What happens, in order
From the first enquiry to the point the cover, the contract or the facility is in place.
The tender documents state the requirement
A percentage of the tender sum, a validity period, and usually the authority’s own form of bond. Public sector forms are standard and rarely negotiated.
We pre-agree the wording under a facility
Facility holders lodge the forms they bid against once. After that a bid bond is an instruction, not an application.
The bond issues before the deadline
Within 24 hours for facility holders. New applicants are underwritten first, which takes the usual two to four working days.
Award, or expiry
On award the bond can roll straight into the performance bond for the contract. If the bid is unsuccessful the bond expires at the end of the tender validity period and the exposure is released.
The numbers
A worked example
Illustrative arithmetic, so the shape of the product is visible rather than described. Nothing here is a quotation or a projection.
A 2% bid bond on a £7.5m tender
A contractor bids for a £7.5m public sector framework. The authority requires a 2% bid bond — £150,000 — valid for the 180-day tender validity period, on its own standard form.
The bidder is a facility holder in band 2 with a parent counter-indemnity in place.
- Bond value
- £150,000
- Term
- 6 months
- Indicative premium rate
- 1.15% p.a.
- Premium for the term
- £863
- Issuance and arrangement fee
- £250
- Total indicative cost
- £1,113
- Cost as a share of bond value
- 0.74% of bond value
How the rate is built
- Base rate — Bid & Tender Bond1.35% p.a.
- Financial strength — Band 2 — strong and consistently profitable−5%
- Security — Parent or director counter-indemnity−10%
- Wording — Conditional — default must be establishedNo adjustment
- Beneficiary — Irish or UK public body, Revenue or HMRCNo adjustment
- Term — Up to 12 monthsNo adjustment
Short-dated bonds frequently price below the minimum premium, in which case the minimum applies — £350 per annum in sterling. That is the reason a bid bond costs what it costs: it is a fixed cost of tendering, not a rate.
What 1%, 2% and 5% of a tender actually means
Bond value required on the same £7.5m tender, at the three percentages authorities most often specify.
View these figures as a table
| Value | |
|---|---|
| 1% of tender | £75,000 |
| 2% of tender | £150,000 |
| 5% of tender | £375,000 |
Suitability
Where the Bid & Tender Bond fits
The cases it answers, the cases it does not, and what an underwriter needs before quoting.
It is the right answer when
- A tender requires bid security and the deadline is close.
- The contractor bids frequently and wants the bond to convert on award.
- The authority uses a standard statutory or framework form of wording.
Look at something else when
- The requirement is for a deposit the authority will hold as cash; a bond is not a substitute unless the rules allow it.
- The contractor has no facility and the deadline is inside 48 hours.
What we need to quote
- 1.The tender reference, the tender sum and the bond percentage.
- 2.The validity period, and the authority’s form of bond.
- 3.For a first application, accounts and a contracts schedule.
Questions
What brokers ask us about this product
How quickly can you issue?
Within 24 hours where the applicant holds a facility and the wording is already agreed. A first-time applicant needs the underwriting first, which is two to four working days from a complete submission.
What happens if we win?
The bid bond can roll into the performance bond for the same contract without re-underwriting. Tell us at the point of award so the facility exposure moves across cleanly.
Is the premium refunded if we lose?
No. The premium is earned on issue: the authority had the benefit of the security for the whole tender period, whoever won.
Request information
Ask us about the Bid & Tender Bond
The form reaches an underwriter in Dublin. If you are an intermediary, say so and we will route it to the broker desk.