When looking to secure a job or project, contractors are sometimes required to provide a bond when submitting their bid. The Bid Bond states that their (contractors) surety company will provide final bonding if the contractor is awarded the project. Bid Bonds are typically written for a percentage (5%/10%/20%) of the total contract price, but can also be for a specific dollar amount.
Claims can be brought against the Bid Bond if the awarded contractor refuses to enter into the contract. The claim amount will be based on the cost difference between the contract price in question and the new contractor bid. Some Bid Bonds call for a full penal sum percentage claim/recovery (not just the difference between the lowest bid and 2nd bidder).