How to Get Bid Bond Guarantee for Construction Contracts?
What is Bid Bonds?
Bid Bonds are a written undertaking or assurance issued by a bank on behalf of its client. This acts as a surety; which guarantees the project owner that the contractor who enters into the contest will oblige the bidding terms if they win the project. And this will increase their chance of winning the tender. Hence, construction contractors often look for options on How to Get Bid Bond Guarantee.
Moreover, this guarantee meant to ensure the seriousness of the price quoted by the contractor. Also, it assures the project owner / developer that the contractor has the skill to complete the job within the quoted price. Since it gives the utmost assurance; almost all project owners demand a tender guarantee from contractors prior to contesting in the bidding process.
Parties Involved
The Principal – The Contractor who requests the bank to avail a guarantee on their behalf; to assure their commitment to undertake the project; as per the quoted price.
The Obligee – The Developer or the Project Owner who receives the bond from the contractor; who submits the quote for tender.
The Issuing Bank – The Bank that issues the bond on behalf of the contractor to assure the project owner; that the bidder will comply with all the terms without any default.
How to Get Bid Bond On Behalf of Your Company?
To issue Bid Bond on your behalf, banks, and other trade finance sectors follows a certain set of terms that should be met by the applicant who applies for a bond.
Few of the terms include – provide a certain percent of the project value as cash margin, or third party assurance or collateral. Also, because of these strict terms, it seems really hard for contractors to avail the Guarantee from their bank.
So, to help those contractors with their requirements, Bronze Wing Trading, trade finance provider in Dubai provides the simple steps for contractors; who wish to avail Tender Guarantee from rated banks without cash margin.
Bid Bond Process
Step 1: At first, contractors submit their request to us by providing the tender copies of the said project.
Step 2: Next, BWT will study their tender copies; and will let them know whether the request has been approved or not. Further, if approved, we will sign a service agreement with the client and ask them to pay the admin charges.
Step 3: After the charges are being paid, BWT will start work on their deal. Further, we will structure their bond with our bank; and then, we will send the draft for their review and approval.
Step 4: The client verifies the draft; if it complies with all the terms; they will acknowledge their approval to us. Then, we will ask them to pay the issuance fee; along with other documents related to the tender.
Step 5: Once they paid the fee and provided the documents; we will instruct our bank to issue the Bond from our bank account. Finally, this will issued on behalf of the contractor and in favor of their project owner.
Now, with Bid Bonds, contractors will be able to win the tender by assuring their project owners; that they can complete the project within the quoted price and set time frame.
How Much Do Bid Bonds Cost?
The cost varies based on factors; such as the contract terms, the quoted amount and the tenure. Also, banks demand 10-20% or sometimes 100% of the bond value as a cash margin; to issue the guarantee on your behalf.
But we help contractors to avail the required guarantee from rated banks without pledging cash margin or collateral.
Looking to avail Tender Guarantee without blocking your cash funds and without tying your working capital? Contact Bronze Wing Trading today! We can help you to get the assurance you need.
Looking to Avail Bid Bond to Contest on a Tender?
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