Canadian Accredited Insurance Broker (CAIB) Three Practice Exam

Who receives the Bid Bond, and when does it become effective?

1. The contractor, upon submission

2. The subcontractor, upon completion

3. The project owner, upon tender acceptance

4. The supplier, at contract signing

The correct answer is: The project owner, upon tender acceptance

The Bid Bond is a financial instrument that provides assurance to the project owner that the contractor will enter into a contract if awarded the project. It protects the project owner from any financial loss that might occur if the winning contractor fails to complete the contract process. The Bid Bond becomes effective upon tender acceptance, meaning that its purpose is to guarantee that once the project owner evaluates and accepts the bid provided by the contractor, the contractor is obligated to fulfill the contract. The project owner receives the Bid Bond at this pivotal moment, thus ensuring their interests are safeguarded against potential default by the contractor after the bid has been accepted. This understanding of timing and the parties involved is crucial for both contractors and project owners during the bidding process.