What is the purpose of a bid bond in construction?

A bid bond serves a critical role in the construction bidding process by guaranteeing that the contractor who wins the bid will complete the project at the specified cost. This bond protects the project owner by ensuring that if the winning bidder fails to follow through with the contract—either by not starting the project or withdrawing their proposal—the owner can claim the bond amount as compensation for any losses incurred due to this failure.

This mechanism encourages contractors to engage in bidding seriously and to provide accurate pricing, knowing they have a financial responsibility if they back out. It assures the owner that only contractors who are committed and capable will take on the project, thereby fostering a sense of trust and reliability in the bidding process.

The other options relate to important aspects of construction but do not accurately describe the function of a bid bond. For instance, bid bonds do not cover payments to suppliers, liability during construction, or delays—those are managed through different types of bonds and insurance policies tailored to those specific risks.