Bid bond

This is used in a public tender competition to bid for a goods supply or public works construction contract in a foreign country when bidders are asked to provide a guarantee. The purpose of this type of guarantee is to ensure that bidders may not withdraw or change their bid until the contract is awarded. Otherwise, the beneficiary of the guarantee will be covered for any expenses incurred when reviewing the bids received.

The amount is usually up to 10% of the value of the bid, and the usual period is limited to the scheduled date of the contract award, and may be extended if necessary (extension of the deadline for tender bids).

These guarantees are usually issued with the commitment that, if the contract is awarded, a performance bond will be issued.