Bid Bonds

Whenever the tender documents call for bid security. That is standard on public construction — federal, provincial and municipal — and common on institutional, lender-financed and larger private work. Requirements differ by owner and by province, and thresholds change, so the operative answer is always in the specific tender. If you are unsure, send us the bid documents and we will read them.

There is no premium for the bid bond itself once you have a bonding facility in place. What you pay is an annual facility fee — commonly in the range of $1,500 to $3,000 depending on the account — which covers bid bonds, agreements to bond, consents of surety and prequalification letters however often you tender. The real premium falls on the performance and labour & material payment bonds issued at award.

The bond amount, or penal sum, is set by the owner’s bid documents — ten percent of the bid is the Canadian convention. It is not a deposit you forfeit. If you refuse to enter the contract, the surety pays the difference between your bid and what the owner legally contracts for with someone else, and only if that figure is higher. The bond amount is a ceiling on that payment, not the payment itself. A certified cheque works the opposite way: the whole amount is already in the owner’s hands.

Under the current CCDC bid bond, the validity period is whatever the bid documents prescribe, or sixty calendar days from bid closing if the documents say nothing. The principal and the owner can extend it by up to a further sixty days without notifying the surety; anything longer needs the surety’s prior consent. Note that the older 2002 form worked differently, using a fixed ninety-day period and a tender-date field. Route every extension request through your broker.

The owner re-tenders or contracts with the next acceptable bidder, and claims on the bond for the shortfall — capped at the bond amount, and subject to the owner taking reasonable steps to mitigate. The surety pays, and then recovers from the contractor under the indemnity agreement. The commercial consequence usually outlasts the financial one: withdrawing from a bonded bid affects your surety relationship and your capacity going forward.

Not by general law. It is a requirement of the owner’s procurement process. Some public procurement rules do make bid security mandatory above a stated contract value, and others leave it to the contracting authority — practice differs across the Atlantic provinces and changes over time. Read the tender, and where bid security is required check carefully whether the owner will accept a bond, a certified cheque, a letter of credit, or only one of them.

You do not apply bond by bond. You establish a bonding facility with a surety through a broker, and once that facility is in place bid bonds are issued on request — usually same or next day. Setting the facility up is the substantial piece: it is an underwriting review of your company, and it takes weeks rather than days. Start well before the tender you actually want to chase.

CCDC 220 is the national standard bid bond form, published by the Canadian Construction Documents Committee. It was reissued in May 2024 — the first update since 2002 — alongside CCDC 221 (performance) and CCDC 222 (labour and material payment). The 2024 bid bond removed the old tender-date field and introduced a defined validity period. The Surety Association of Canada has confirmed the risk profile of the forms did not change; they are clearer, not broader. If a form in front of you references a “Tender Date” or a fixed ninety-day acceptance period, you are looking at the superseded version.

A bid bond is financial security: it responds in money if you fail to enter the contract. An agreement to bond — sometimes called a consent of surety — is a letter confirming the surety will issue the performance and payment bonds if you are awarded the work. It provides the owner no financial security at all. The two are complements, not substitutes, which is why many tenders require both.

If the owner permits it, yes — but both are worse for you. A certified cheque ties up the full amount in cash and the whole sum is exposed if you default. An irrevocable letter of credit reduces your operating line dollar for dollar, usually requires cash security or bank covenants, and is payable on demand, meaning the bank pays when the owner asks regardless of whether you were actually in default. A bond costs you no cash, no credit line, and pays only a proven loss.

It is entirely at the owner’s discretion. Institutional owners, developers with construction financing and larger private owners commonly require bid security because their lenders expect it. Smaller private owners often do not. If you work mostly private and want to move into public tendering, getting a facility in place is the first step — not the tender itself.

If no contract is awarded, there is no failure to enter into a contract and nothing for the bond to respond to. The bid bond simply expires at the end of its validity period. Where an award is delayed rather than cancelled, watch the validity period and speak to your broker about an extension before it lapses.

No. A bid bond names one principal, one obligee and one specific bid. Each bidder needs its own bond from its own surety. Where contractors bid a project as a joint venture, the bond is issued in the name of the joint venture and the sureties of the participants underwrite it on that basis — which needs arranging in advance, not on bid day.

Increasingly, yes, but acceptance is owner by owner rather than universal. An e-bond is an encrypted, verifiable document carrying a digital signature and corporate seal, and it can be uploaded to tendering platforms or delivered as a secure file. Your broker needs an electronic power of attorney from the surety to issue one. Always confirm against the specific tender whether an electronic bond is accepted or an original is required.

Expect to provide externally prepared financial statements for the last three to five fiscal year-ends plus current interim figures, a work-in-progress and work-on-hand schedule, a list of completed jobs with the profit earned on each, aged receivables and payables, bank line details, resumes for key people, a continuity plan, and personal net worth statements for the owners. You will also sign a general indemnity agreement. Underwriting takes weeks, not days — so the answer to “how long” is: longer than the tender period you are currently looking at.