Bid Bonds in California: The 10% Rule and How to Get One

A bid bond is a surety's assurance that if your bid is selected, you will sign the contract and provide the required performance and payment bonds. California public agencies require bidder's security equal to at least 10% of the amount bid, and a bid bond from an admitted surety insurer is one of the allowed forms, alongside cash and cashier's or certified checks.^[1][2] A bid bond usually costs nothing by itself. The National Association of Surety Bond Producers (NASBP) notes that "bid bonds typically have no fee," since the surety is really evaluating you for the final bonds.^[3]

This guide is for a California contractor preparing a first public bid, or a private bid that requires security. It covers what a bid bond guarantees, the amounts required under California and federal law, how to get one in time, what it costs, and what happens if you are awarded the contract but cannot proceed. When you have the bid documents, send the bond requirement to us and a bond specialist will review them.

What does a bid bond guarantee?

That the winning bidder will follow through. NASBP explains the bid bond as the owner's way to recover the cost of rebidding, or the difference between the low bidder and the next low bidder, when the winner "fails to sign the contract or provide the required performance and payment bonds."^[3] It does not guarantee any part of the construction itself.^[3]

For the bonds that follow the award, see our guide to performance and payment bonds in California.

How much bid security does California require?

At least 10% of the amount bid for cities and state agencies. For state agency contracts, Public Contract Code section 10167 requires every bid to be sealed and submitted with bidder's security "in an amount equal to at least 10 percent of the amount bid," and provides that a bid without it will not be considered.^[1] The accepted forms are an electronic bidder's bond from an admitted surety through an approved registry, a signed bidder's bond from an admitted surety, or cash, a cashier's check or a certified check.^[1]

Cities also follow the same 10% rule. Section 20170 lists cash, a cashier's check, a certified check or a bidder's bond from an admitted surety, and section 20171 states that the amount must be at least 10% of the bid.^[8][2] Counties, school districts and special districts have their own sections, so the instructions to bidders are the document to follow.

Federal work asks for more. FAR requires a bid guarantee of at least 20% of the bid price, but not more than $3 million, on contracts that need performance bonds.^[4]

Most contractors use a bond rather than cash, because a 10% check ties up working capital until the award.

How much does a bid bond cost?

Usually nothing on its own. "Bid bonds typically have no fee," according to NASBP.^[3] The surety earns its premium on the performance and payment bonds if you win, and the usual rate is around 1% of the contract.^[3] The SBA's surety bond guarantee program also charges small businesses no fee for bid bond guarantees.^[9]

The real cost is in the underwriting. A surety issues a bid bond only if it is willing to write the final performance and payment bonds, so it reviews your finances and experience at the bid stage.

How do I get a bid bond?

Open a surety account before the bid, not on the day it's due. The surety prequalifies you once for a limit and then issues bid bonds as needed for each project within that limit. Expect it to review your credit history and financial strength, experience, equipment, work in progress, management capacity and character, and to ask the owners to sign a general agreement of indemnity.^[3]

For each bid, send the surety:

1. The bid documents, or at least the invitation to bid and the bid bond form the agency requires.
2. The bid amount (or a range) and the bid date.
3. The estimated job cost, your planned subcontractors and the schedule.
4. Your current work-in-progress schedule.

Small and new contractors have programs established for them. RLI Surety writes bid, performance and payment bonds for small contractors through its First Step and Next Step programs.^[10] The SBA guarantees bonds on contracts of up to $9 million for non-federal projects and up to $14 million for federal projects.^[9]

What happens if I win the bid and can't sign?

The public entity keeps the security, or claims on the bond. For cities, when the successful bidder fails to execute the contract, "the amount of the bidder's security shall be forfeited to the city."^[5] For state agencies, the director may award the contract to the second or third-lowest bidder, and if a bidder refuses, its security is forfeited.^[11] If you used a bond, the surety pays and then recovers from you under the indemnity agreement.^[3]

A genuine clerical mistake can be relieved, but only on strict terms. The bidder must prove that a mistake occurred, that it gave the public entity written notice within five working days after bid opening, that the mistake made the bid materially different, and that it happened in completing the bid form, not from an error in judgment or a careless reading of the plans.^[6] Once you have identified a mistake, send your written notice immediately.

This guide is general information based on California and federal law and industry sources dated 2021–2026. Bid security rules come from the bid documents and the code that governs the agency, which control. Menlo Insurance Services (CA license 6020106) is a licensed broker that may earn a commission on a placement and does not guarantee that a surety will issue any bond.