How to Calculate the Amount of a Bid Bond

by Jackie Lohrey, studioD

Bidding procedures for most federal, state and local government construction projects require a bid bond in addition to the initial project bid. Bid bonds -- also called surety bonds or bid guarantees -- are a “good faith” promise that if you get the contract, you will enter into it at the bid price as well as provide performance and payment bonds the contract may require. Using a spreadsheet to calculate both the bid and amount of the bid bond automates the process, and because a bond equals a percentage of the total bid, it eliminates the need for recalculations if your initial bid changes.

Review the contract bidding instructions to become familiar with the bidding process. Then, locate and review information -- either in the application or on a separate page -- pertaining specifically to the bid bond. Understand that most often the amount of a bid bond is not an amount upon which you decide, but a set percentage of the amount of your calculated bid. For example, instructions may tell you to submit a bid bond of 10 percent of the bid regardless of the amount, or they may make a bid bond only necessary for bids over $100,000.

Open a computer spreadsheet program such as Microsoft Excel, and create and total your bid on the first worksheet in the workbook.

Move to the second worksheet in the workbook and create a summary sheet you can also use to calculate the amount of a bid bond. Refer to the application instructions and identify worksheet objects that go into calculating the bid bond. Starting in row 4 of column A, enter object identifiers in column A of the worksheet. Depending on the contract, these can include objects such as the base bid, extended unit price calculations, allowances for materials you need to include later and if your contract allows, additions to or deductions from the bid amount for approved alternates.

Transfer the amounts from your bid calculation worksheet to a corresponding cell in column B of the bid bond worksheet so they will automatically update if you make any changes prior to submitting the bid. Click in cell B3 on the bid bond worksheet and type an equal sign. Then, move to the bid calculation worksheet and click in the cell that holds the amount -- for example, the amount of the base bid -- and press “Enter” to enter the amount automatically. Repeat this process to enter each object necessary for calculating the bid amount.

Add two additional entries to column A: one for the bid total and one for amount of the bid bond. Skip a row between the last object entry and the bid total to make the worksheet easier to read.

Enter the formula “=SUM(B3:B7)” -- or whatever range of cells you use -- in the appropriate cell in column B and press "Enter" to get the bid total. This amount should agree with the total bid amount you calculate on the bid worksheet.

Enter the formula “=B7*.10” -- or whatever cell holds the bid total and whatever percentage the bid contract requires for the bond -- in the appropriate cell and press "Enter" to get the amount of the bid bond.

Items you will need

  • Bid contract instructions
  • Microsoft Excel

About the Author

Based in Green Bay, Wisc., Jackie Lohrey has been writing professionally since 2009. In addition to writing web content and training manuals for small business clients and nonprofit organizations, including ERA Realtors and the Bay Area Humane Society, Lohrey also works as a finance data analyst for a global business outsourcing company.

Photo Credits

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