A bid bond secures your tender — typically 10% of bid value — and proves you will enter the contract if awarded. A performance bond guarantees contract completion — usually 50% of contract value. A labour and material payment bond protects subcontractors and suppliers — also typically 50%. Alberta municipalities require bid bonds at submission and performance plus L&M bonds within a defined period after award.
What is a bid bond and when is it required?
A bid bond is a surety guarantee that you will sign the contract and provide performance bonds if your bid is accepted. It protects the municipality if the low bidder walks away.
What percentage is a bid bond in Alberta?
Most Alberta municipal ITTs require a bid bond equal to 10% of your total bid price. On a $400,000 bid, that is a $40,000 bond. Some RFPs accept certified cheques or bank drafts instead — check the mandatory forms section.
What happens if you win but refuse to sign?
The municipality can claim the bid bond amount. Your surety pays the municipality and pursues recovery from you. Refusing award also damages your surety relationship and future bonding capacity.
What is a performance bond?
A performance bond guarantees you will complete the contract according to specifications. If you default, the surety steps in to complete the work or compensate the municipality up to the bond amount.
What percentage is a performance bond?
Alberta municipal contracts typically require a performance bond at 50% of contract value. A $1,000,000 award requires $500,000 in performance bonding. This is required after award, not at bid.
How do you prove bonding capacity in your bid?
Most RFPs require a letter from your surety confirming ability to bond the project at the stated percentages. Get this letter before finalizing your price — if your surety declines, you cannot bid.
What is a labour and material payment bond?
The L&M bond ensures subcontractors, labourers, and material suppliers get paid on a municipal project. It protects the municipality from liens and claims arising from your non-payment.
Is L&M bond always required?
Most Alberta municipal construction contracts above threshold require both performance and L&M bonds at 50% each. Some professional service contracts require only performance bonds or none at all.
Who benefits from the L&M bond?
Subcontractors and suppliers can claim against the bond if you fail to pay them. This is why municipalities require it — it keeps public projects free of construction liens.
How do contractors build surety capacity for municipal work?
Surety is a relationship business. Bonding companies evaluate your financial statements, work-in-progress, management experience, and track record before setting a bonding line.
What financial documents do sureties require?
Three years of CPA-prepared financial statements, current work-in-progress schedule, personal net worth statements from owners, and banking references. Weak financials cap your bonding line regardless of trade skill.
Can you bid a project that exceeds your bonding line?
No. Confirm capacity before estimating. NorthCited's go/no-go scoring includes bonding fit so you do not waste days pricing a project your surety will not support.