How much is a federal bid guarantee?
The amount must be enough to protect the government, and at least 20% of the bid price. It must not exceed $3 million (FAR 28.101-2). Item 13b of Standard Form 1442 tells you if one is required.
The solicitation may state the amount as a percentage or as a fixed sum. If it gives a percentage, your guarantee rises with your price. Size it against your final bid, not your first estimate.
| Your bid | 20% of the bid | Guarantee needed at 20% |
|---|---|---|
| $500,000 | $100,000 | $100,000 |
| $5,000,000 | $1,000,000 | $1,000,000 |
| $20,000,000 | $4,000,000 | $3,000,000, the cap |
These are worked examples at the 20% floor. The solicitation you are answering sets the actual amount.
What can you use as a guarantee or a bond?
Most contractors use a surety bond. The standard forms are below, but the solicitation may also name others.
You may give other security in place of a surety (FAR 28.204). The accepted types are listed here. You may combine them, and you may swap one for another while the bond is required.
- United States bonds or notes (FAR 28.204-1)
- Certified or cashier's checks, bank drafts, money orders or currency (FAR 28.204-2)
- An irrevocable letter of credit (FAR 28.204-3)
| Purpose | Standard form |
|---|---|
| Bid bond | SF 24 |
| Performance bond | SF 25 |
| Payment bond | SF 25A |
| Continuation sheet for the three above | SF 25B |
What happens if your guarantee is missing or too low?
In sealed bidding, failing to meet a guarantee requirement means your bid must be rejected (FAR 28.101-4). The rule has a short list of exceptions, and you should not plan around them.
The contracting officer waives the failure in these cases, unless they decide in writing that doing so would harm the government:
- Only one offer is received.
- The guarantee is short, but it still covers the gap to the next higher acceptable offer.
- The guarantee arrives late, and the lateness is waived under the rules for late bids.
- A corrected mistake makes the guarantee too low, and you agree to increase it.
In a negotiated purchase, a proposal without a required guarantee is treated as unacceptable if the award will be made without discussions. The same exceptions apply.
Which bonds follow the award?
The contract value sets what you furnish. The thresholds below come from FAR 28.102 and match the overhaul text.
Item 12b of the form states how many calendar days you have to furnish them after award. Ask your surety about that period before you bid, and include the premium in your price.
| Contract value | What you furnish | Amount |
|---|---|---|
| Above $150,000 | Performance bond and payment bond | Each 100% of the original price, plus 100% of any increase |
| Above $35,000, up to $150,000 | Payment protection, from options the contracting officer selects | Generally 100% of the original price |
| $35,000 or less | Check the solicitation | As the solicitation states |
How do you allow for bonds in your price?
Your surety sets the premium from your record, your finances and the job. No published table will give you your rate.
Get a written indication from your surety before you close the estimate. Then enter it as its own line in your general conditions, so you can check it again at the end.
- 1Confirm in items 12a and 13b what the solicitation requires.
- 2Ask your surety for a bid bond and an indication of the final bond premium.
- 3Add the premium to your general conditions as its own line.
- 4Confirm the guarantee amount against your final bid price before you submit.
- 5Diary the days in item 12b, so the bonds arrive on time if you win.
What Bidligence does here, and what it does not do
Bidligence reads the bond and guarantee terms from the solicitation. It adds them to your submission checklist, so they cannot be missed at the end. It can also add a bond line to your priced schedule, for you to check.
It does not issue bonds, and it does not advise on them. Your surety, broker or bank must confirm what they will provide. The solicitation you are answering always decides.
Questions
- Is a bid bond required on every federal construction job?
- No. Item 13b of the form states if a guarantee is required. It is normally required when the job needs a performance bond.
- How much is a federal bid bond?
- The guarantee is at least 20% of the bid price, and it must not exceed $3 million (FAR 28.101-2). The bond's cost is set by your surety.
- Can I use a letter of credit instead of a surety bond?
- Yes. FAR 28.204 allows an irrevocable letter of credit, certain checks and drafts, currency, or United States bonds and notes.
- Do these rules apply to state and city jobs?
- No. These are federal rules. States and cities set their own, so read the rules in the solicitation you are answering.
Sources
Rules and portals change. Check the tender’s own documents and the official source before you rely on any of this.
- FAR 28.101-2: Solicitation provision or contract clause, bid guarantees
- FAR 28.101-4: Noncompliance with bid guarantee requirements
- FAR 28.102-1: Performance and payment bonds for construction contracts
- FAR 28.106-1: Bonds and bid guarantees, standard forms
- FAR 28.204: Alternatives in lieu of corporate or individual sureties
- FAR overhaul, Part 28: model deviation text
