Guide
Bonding and liquidated damages: when to walk away
Two clauses kill more public bids than most estimators admit. Here is how to read them before you spend days on a takeoff.
Decision rule
If bonding is above capacity or LD exposure exceeds what your schedule can absorb, treat the RFP as NO-GO until a concrete mitigation path exists — not a hope.
What to scan first
- 1
Bid bond as a capacity filter
If the bid bond percentage times estimated contract value exceeds what your surety will support this week, stop. Do not start a takeoff hoping the broker “figures it out.”
- 2
Performance and payment bonds
100% P&P bonds on a project above your single-job limit are a hard NO-GO unless you have a written co-surety or joint-venture path before bid day.
- 3
Liquidated damages vs crew reality
High daily LDs with an aggressive completion date turn thin-margin work into a loss. Match LD exposure to weather windows, long-lead equipment, and crew availability.
- 4
Addenda that change bond or LD math
Late addenda often raise bond amounts or compress schedule. Re-run the go/no-go after every material addendum — not only after the first PDF.
Faster path with RFPCheck
RFPCheck flags bonding and liquidated-damages language in the PDF so you can kill bad fits in under a minute. Always verify amounts in the source solicitation.
FAQ
What bonding red flags usually mean NO-GO?
Bid bond above surety comfort, performance/payment bonds above single-project capacity, and no time to structure a joint venture or co-surety before the due date.
Are liquidated damages always a deal-breaker?
No. Modest LDs with a realistic schedule can be fine. Steep daily LDs plus incomplete drawings, owner-caused delay history, or fixed end dates with no float are the dangerous combination.