What does a bid or proposal bond guarantee?

A bid or proposal bond guarantees that the party will enter into a contract if their proposal or bid is accepted. This type of bond serves as a financial assurance to the project owner that the bidder is serious and committed to honoring the terms of the bid if they are awarded the contract.

When a contractor submits a bid that includes a bid bond, it indicates their readiness to follow through with the contract once selected. Essentially, if the bidder fails to sign the contract after winning the bid, the bond ensures that the project owner will receive compensation, typically allowing them to cover any additional costs incurred while finding a new contractor. Therefore, the guarantee of entering into a contract is a fundamental aspect of the bid bond's purpose in the context of construction and procurement processes.

The other options do not accurately reflect the primary purpose of a bid bond, as it does not guarantee payment of a fee, does not ensure the bid will be the lowest, nor does it confirm that the bidder has undergone a background check.