Contractors bid on municipal projects for reliable income, large opportunities, and enhanced reputation. These bonds are vital for companies looking to diversify in the public sector. This article will explore the crucial role of bid bonds for plumbing and heating contractors. Bid Bonds help companies in their industries secure municipal contracts. Bid bonds for plumbing and heating contractors can also help contribute significantly to local development and community growth.

Critical to all that growth is a requirement that might be relatively new to you: bid bonds. But if you’re not very familiar with bid bonds, don’t worry—Ferrari & Associates has you covered. Here our Director of Surety, Kari Davis breaks down what bid bonds are, why they’re needed, and how they work.

What Is a Bid Bond?

Let’s start with the basics. A bid bond is a type of guarantee provided by a surety company to the project owner. It guarantees that your bid is accurate and if awarded the project, you’ll sign the contract at the bid price and provide the Performance and Labour & Material bonds, if required. It also shows that your company is serious about bidding on the job, and has the financial and operational ability to complete the project. Essentially, a bid bond is a way to give the city or project owner assurance that you can deliver the work at the bid tendered.

Why Are Bid Bonds for Heating and Plumbing Contractors Required?

Bid bonds serve to protect project owners from financial risks by ensuring commitment; if a contractor wins a bid but later decides not to proceed, the bond compensates the owner for the inconvenience of re-awarding the project. Side note, if the winning contractor backs out of a bid, they face financial penalties, potential legal action, damage to their reputation, and difficulty securing future bonds.

This reinforces the importance of careful bidding and maintaining open communication with the project owner and bonding company to avoid such scenarios. This further enforces the importance of bid bonds because requiring bid bonds filters out unreliable bidders, ensuring that only qualified and serious contractors participate in the bidding process. For municipal projects, having a bid bond is often a legal or policy requirement before submitting a proposal.

How Do Bid Bonds for Plumbing and Heating Contractors Work?

Here’s a simple step-by-step breakdown of how bid bonds work:

• You Apply for a Bid Bond: You’ll work with our surety to secure a bid bond. we’ll review your financials and business history to ensure you’re a reliable bidder.
• Include the Bond in Your Bid Package: When you submit your proposal, the bid bond is part of the package and will show the project owner that you’re prepared and qualified.
• If You Win the Job: The bid bond guarantees you’ll sign the contract and provide the necessary performance and payment bonds (if required).
• If You Don’t Win the Job: The bond is no longer active. There’s no cost to you unless you failed to honour the terms of the bid.

How Much Does a Bid Bond Cost?

The good news is that bid bonds are kind of like loss leaders. Like cheap printers with the expectation that someone will buy the more expensive inks, or consultants that offer free consultations anticipating clients will invest in ongoing services, surety companies offer bid bonds as part of their service because they earn fees on the larger performance and payment bonds issued after the contract is awarded, ensuring that both the client and the surety have a vested interest in the project’s success.

Bid bonds are “free”/included in the annual Surety Facility Fee as are Prequalification Letters. These clients typically benefit from a strong relationship with their bonding providers, which can lead to favourable terms that further enhance their financial dealings in construction projects.  

How to Get Started with Bid Bonds for Plumbing and Heating Contractors

Getting a bid bond is simpler than you think. Here’s what you need:

• Financial Statements: Provide your bonding company or broker with up-to-date financial records.
• Project Details: Share information about the type of jobs you’re bidding on and your business history.
• Choose the Right Partner: Work with Ferrari & Associates because we understand your industry and can guide you through the process.

*In order to obtain a bid bond or Performance & Labour and Material Bonds, we will need to set up a Surety Facility.

Why Bid Bonds Are Important for Your Growth

For plumbing and heating companies, bid bonds aren’t just a requirement—they’re an opportunity. By meeting the bonding requirements for city jobs, you gain access to larger projects, build credibility, and position your company as a trusted partner for high-value clients.

We’re Here to Help

If you’re new to bonding, don’t stress! You can start by reading our other blog articles by clicking here. Our surety team specializes in helping businesses like yours navigate bonding requirements and secure the tools you need to grow. Whether it’s your first bid bond or expanding your bonding capacity, we’re here to guide you every step of the way. We also help our clients secure performance bonds, labour & material payment bonds and maintenance bonds too.

To start the surety quote process, click here.

*The information provided on this page is for information purposes only and should not be taken as insurance advice. For actual insurance advice, please contact Ferrari & Associates at 1-888-467-8989