contractor holding his bid documents for tender date


As the old saying goes, you’ll need to spend money to make money. It is unfortunate but a way of life for Texas business owners. Nevertheless, you have to understand that you can generate a profit as long as you properly manage your budget.

Depending on the industry you serve, there is a chance that you’ll be required to work with surety bonds. This can be a confusing topic, but you’ll get the hang of it quickly. Texas’s construction contractors will need to understand surety bonds for construction projects than anyone else.

After all, you’re going to use construction surety bonds each time you decide to accept a new project. Even if you bid on a project and lose the bid, you’ll need to deal with surety bonds. It suffices to say that they’re a vital component of your business. Within this guide, you’re going to learn more about the cost of bid bonds.


Ideally, the cost of a bid bond ranges from 5% to 20%. Whereas, for smaller projects, there may be a flat fee of $100 or $200. However, many factors can either increase or decrease the costs significantly.


First, you should learn more about bid bonds, the use of  bid bonds in construction,  and the  purpose of bid bonds. Why should you get a bid bond? How will it help you? When you’ve learned about a new project, you’ll want to place a bid on that project as quickly as possible. Acting quickly can help show the project’s owner that you’re prepared and ready to begin working. You could bid on the project without bid bonds, but doing so could be costly. It is best to obtain a bid bond from a surety company so you can make your bid count, and the turnaround time for bid bonds is extremely low.

The bid bond protects the project owner by confirming that your company is financially stable and capable of fulfilling its contractual duties. The surety company was willing to give you a bid bond. They issued the bond after checking your company’s history, experience, and financial status. This gives the owner confidence. Furthermore, the owner knows that they’ll always be able to seek compensation if your company cannot follow through.

Bid bonds help regulate the industry and prevent incapable companies from stealing projects from legitimate companies. Since the bid bond requirement stops bad companies from bidding on projects, it helps reduce competition. This makes it easier for legitimate companies to get work.

To learn about this in more detail, please take a look at how does a bid bond work?


One thing you’ll need to know about bid bonds is how much you’ll need to pay. How much can you expect to pay when trying to obtain a bid bond for an upcoming project? Ultimately, the costs of bid bonds and the asking price of bid bonds will depend on the project and bid you’re placing. However, you will usually be required to obtain a bid guarantee that is a certain percentage of the bid amount. As an example, you may be required to get a bid bond that is 5% of the total bid. The percentage may be higher than that though.

It can be anywhere from 5 to 20%. You will need to check with the project manager and surety company to determine what is required. For smaller projects, you may not be required to pay a percentage of the bid amount. Instead, you may be charged a flat fee premium of $100 or $200. If you are bidding on a large-scale project, you can expect to pay more.

While these costs will cut into your profits, they cannot be avoided. You will have to pay these fees at some point. You can put up cash as collateral, but the risks are grave. Therefore, it is best to use a bid bond to protect the owner during the bidding process.


When you need to bid on a project, you’ll want to purchase a bid bond. Before you can do that, you will need to establish your bond line. This means you’ll need to work with a surety company and prove that your company can get the job done. You also need to show that your business is financially stable. Once you’ve done this, the company will be ready to issue you bid bonds. It is free to request a bid bone once you’ve established your bond line. However, you will need to pay for the bond at some point.

You will likely need to pay for the bond once the job has been awarded to your company. At this point, the bid bond will be returned, and you will need to purchase performance bonds and payment bonds. Either way, you should expect to pay something when you decide to get a bid bond and bid on a project.


It is important to understand that the cost of a bid bond may vary depending on several factors. The premium paid by your company will be based on the bid cost, the project’s location, the owner, and your financial history. When dealing with small projects, the premiums will likely be a flat fee of a few hundred bucks. If you’re bidding on a big project, the surety will analyze the aforementioned factors before determining how much you’ll need to pay.

The surety takes a risk when bonding a company. Therefore, they want to take steps to minimize their risks and avoid problems. To do that, they’re going to study the bidder’s history and financial status to make sure they’re going to follow through with their promises. With this in mind, you can manage your costs. If you want to minimize your costs, you should do your best to run a successful construction company. However, things can be very different for contractors with no previous surety bonding history.

Properly managing your books can make a big difference too. Finally, you should pick a good surety agency. Some agencies will overcharge for bonds, and you’ll want to avoid these companies. Instead, you should find a firm that offers reasonable bond rates. Stokes Surety Bonds is here to help.


Remember that bidding on a project is just the beginning. You need to be ready for the future as well. Once the project owner has decided to accept your bid, you’ll need to work quickly to obtain performance bonds and payment bonds. If you don’t, the owner can file a claim against your bid bond, and you’ll run into various problems. You’ll want to trade in the bid bond for performance and payment bonds, so you can begin working on the project as quickly as possible. The only downside is that you’re going to have to deal with additional bond costs.

When dealing with performance bonds, the surety company will analyze your qualifications as well as the  contract. Then, you will be required to pay a certain percentage of the contract amount. On average, this will range from 1 to 5%. It can be difficult to find out how much you’ll be asked to pay. With this in mind, you should consult with a surety expert. This is the best way to know what is going to happen and the cost of performance bonds.


Whether you’re dealing with bid bonds or payment bonds, you need to do what you can to minimize your costs. This will ensure that you’re able to save more and make more. So, what can you do to avoid overpaying? First, you need to learn more about bond pricing. Familiarizing yourself with the pricing structure can help you find out which surety agent will provide you with the cheapest bonds. You’ll also want to pay attention to your personal credit. The surety agent will look at your personal credit when deciding how much you’ll pay.

If you have great credit, you’ll pay less. You need to take steps to clean up your credit report by removing negative marks. If you can do that, you’ll pay less for surety bonds. It is important to properly organize your business’s financial books. Remember that the surety agency will want to make sure that your company is financially stable. They’ll look at the books to determine if you can reasonably pay suppliers, contractors, and get the job completed.

Keep thorough records, so you can make a good impression. You’ll want to take time to collect money that is owed to you too. This can help boost your finances and that will look better in the books. With better records, the surety agency may bond your company for less.

To learn more about costs in detail, please take a look at the  cost of a construction bond.


Finally, you should learn how to manage claims. You could experience a claim whether you’ve obtained a bid, performance, or payment bond. With that being said, you need to learn how to mitigate problems so they do not impact your business negatively and send your bond costs higher. It is best to avoid claims from the beginning. You should work closely with your clients so they know what is going on at each step.

If you make them a part of the process, they’ll know what is getting done, and they’ll appreciate this. It will prevent them from mistakenly thinking that you’re dragging your feet. They’ll know that the project is moving along swiftly. Furthermore, you need to be open and honest. If you experience delays, you should tell the owner about it. They’ll likely forgive you and work with you as long as you tell them what is happening. Avoid claims so you can minimize your bond costs.

To learn more about claims in detail, please take a look at a performance bond being called.