Financial Guarantee Bond | Insurance Guarantee Bond
6 terms

Bid Bond or Bid Deposit

What is a bid bond or bid deposit, and when is one required?
Bids on contracts for construction or repair work in the formal bidding range must be accompanied by a bid bond or deposit in the amount of not less than 5 percent of the bid. This security is held by the local government to guarantee that the successful bidder will execute the contract and provide performance and payment bonds if required.
Can a bid bond or bid deposit be accepted if it is submitted in a form other than the ones listed in the statute?
For construction or repair contracts in the formal range the bidding statute allows the bid deposit to be made in the following forms: cash, a cashier's check, a certified check on a bank or trust company insured by the Federal Deposit Insurance Corporation, or a bid bond executed by a corporate surety licensed under the laws of North Carolina."
If a bid is not accompanied by a proper bid deposit, can the bid be accepted if the bidder can provide the proper bid deposit before the contract is awarded or soon after the bid opening?
The competitive bidding statute provides that "[n]o proposal shall be considered or accepted ... unless at the time of its filing the same shall be ac companied by a [bid deposit or bond]." 75 This language suggests that a bid deposit or bond in the right amount and the right form must accompany the bid no later than the time of the bid opening.
How is the amount of the bid deposit calculated for contracts where the amount of work or quantity to be purchased is not specified?
For construction projects, sometimes the unit will ask for prices on alternates, leaving to the unit the choice of whether to include that work, depending upon the prices offered. In these situations, it is difficult to calculate 5 percent of the bid amount in order to comply with the statutory bid deposit requirement.

For purchase contracts with open-ended quantities, the unit can estimate
a quantity for the sole purpose of the bid-deposit calculation, making clear in the specifications that it reserves the right to purchase more or less than the estimated quantity at the price offered, depending upon needs.
If a bid is received without the proper bid deposit, can it be counted for purposes of the three-bid requirement?
The statute does not specifically address this question, and there has been no clarifying case to date. Since the statute says that a bid shall not be considered unless it is accompanied at the time of its filing by the proper bid deposit, it would not seem appropriate to count it when determining how many bids have been received. As noted in Question 93, three bids are required only for construction or repair contracts in the formal range.
Can a local government accept a faxed bid bond?
The answer to this question is not entirely clear. The bid bond must be submitted in a form that is legally enforceable. As noted earlier, state law rec ognizes the validity of electronic contracts where the parties agree to use them. (See Question 18.) Under this authority, it would appear that the local govern ment could agree to accept a faxed bid bond as long as the parties (including the surety company) agree to use this form of contract.76 If faxed documents are to be accepted, it is important for the specifications to indicate this so that all bidders will be aware of this option.