What is a bid bond?

A bid bond is essentially a form of guarantee that a contractor will honor the terms of their submitted bid during the procurement process for a construction project. When a contractor submits a bid to a project owner, the bid bond serves to reassure the owner that if the contractor is selected for the project, they will proceed to contract and fulfill the obligations of the bid as stipulated. This ensures that the project owner is protected against the potential loss of selecting a contractor who, for whatever reason, may choose not to complete the contract once awarded. The bid bond assists in maintaining integrity in the bidding process and ensures serious bidders are putting forth their best proposals knowing there are financial repercussions for backing out.

The other options highlight different types of bonds or agreements that serve distinct purposes in the construction industry. For instance, a contract signed by both parties signifies a legally binding agreement, while bonds related to supplying materials or ensuring payment cover different aspects of financial and operational security in project execution. However, a bid bond is specifically focused on the commitment to honor a bid, making it the correct answer here.