Arizona Bid Bonds

Surety Bond Professionals is a family owned and operated bonding agency with over 30 years of experience. With access to a broad range of surety markets, our expert agents are ready to assist with all of your bid bond needs.

What Are Arizona Bid Bonds?

Arizona bid bonds protect project owners against financial losses incurred when the winning bidder for a construction job pulls out and does not accept the contract. This typically happens when a contractor concludes that their bid was too low to make money on the job or when a contractor submits bids on multiple jobs knowing they don’t have the resources to accept more than one contract. Bid bonds help deter such frivolous bidding.

A bid bond is a contractor’s guarantee that a bid is accurate and that the contractor is capable of furnishing any required performance of payment bond. When a bidding contractor violates the terms of a bid bond, the project owner can file a claim to be compensated for the costs and delays resulting from having to select another contractor.

Who Needs Them?

In Arizona, bid bonds usually are required for public works projects valued in excess of $25,000. Increasingly, private project owners, as well as public awarding authorities, are requiring bid bonds from potential contractors.

The required bid bond amount typically is 10% of the contractor’s full bid price for the job.

How Do Arizona Bid Bonds Work?

An Arizona bid bond is legally binding on all three parties to the bid bond agreement:

  • The obligee – the project owner requiring the bond,
  • The principal – the contractor purchasing the bond, and
  • The surety – the party guaranteeing the payment of valid claims.

The surety guarantees that claims will be paid and extends credit to the principal for that purpose, if necessary. When the surety’s investigation of a claim determines that it is valid, the surety pays the claimant directly, which creates a debt that the principal must subsequently repay. If the debt is not repaid, the surety can take legal action against the principal.

How Much Do They Cost?

The premium cost for an Arizona bid bond is a very small percentage of the required bond amount. That percentage, the premium rate, is set by the surety on a case-by-case basis through underwriting. The main underwriting concern is the risk that the principal might not repay the surety for the credit extended in paying claims. The best measure of that risk is the principal’s personal credit score.

A high credit score means low risk, and a low credit score means higher risk. Low risk deserves a low premium rate, while higher risk warrants a higher premium rate.

A well-qualified principal typically will be assigned a premium rate in the range of .5% to 3%.

Call Us Today

Our surety bond professionals will help you grow your revenue by maximizing your surety capacity. Call us today!