Q: What is bid bond Guarantee ?

Ans: A bid bond provides a guarantee that a winning bidder will take up the contract as per the terms at which they bid. A bid bond ensures compensation to the bond owner if the bidder fails to begin a project. Bid bonds are often used in construction jobs or other projects that follow a similar bid-based selection process.

For instance, for a Rs 500,000 bid, the contractor will have to secure a bid bond for Rs 50,000. That Rs 50,000 serves as a guarantee that the contractor will complete the project for the Rs 500,000 bid value. If the contractor denies to complete the project, the owner can file a claim against  Rs 50,000 bond.
It means if the successful bidder backs out from the contract, bid bond will be invoked.
Bid Bond is also called EMD i.e., Earnest Money Deposit.
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