A Bid Bond is almost always required for a contractor to bid on any type of government work (federal and state) and local public agencies. The Bid Bond provides assurance to these obligees that the contractor has the ability to provide a Payment and Performance Bond if it is the successful bidder.  If the contractor is the successful bidder and does not enter into a contract with the obligee, the obligee has the right to make a claim on the Bid Bond for the difference between the contractor's bid and the next bid, or the amount of the bid bond (usually 5% to 20% of the bid amount), whichever is less.  Even though sureties typically don't charge a premium for Bid Bonds, the contractor is still liable to hold the surety harmless, or reimburse the Surety for any loss it may suffer.