It protects the owner against a bidder who can't or won't stand behind its number. On federal construction work, the bid guarantee must be at least 20% of the bid price, capped at $3 million; many state and local jobs set their own percentage, often 5% to 10%. The security can take several forms — a surety bond, a certified or cashier's check, or sometimes an irrevocable letter of credit — but a surety-backed bid bond is by far the most common, because it also signals that a surety has already vetted the contractor's finances and capacity.
If the low bidder then refuses to enter the contract, the owner can collect the difference between that bid and the next acceptable one, up to the bond amount. Because bid security is a pass/fail submission item, missing or mis-sized security gets a bid tossed at opening. Nonlinear's Spec Takeoff surfaces the bid-security requirement and amount early in pursuit screening, so the bonding conversation with your surety starts well before the deadline.
