1. What is a Bid Deposit?
Abid deposit (also called a bid bond)is afinancial guarantee that ensures a contractor will follow through if awarded a project.
Itprotects the project owner (client) from financial losses if the bidder fails to sign the contract or complete the work.
2. Why Are Bid Deposits Required?
Discourages bidders from backing outafter submitting a proposal.
Ensures thatonly serious, financially stable bidders participate.
If the winning bidderfails to fulfill their obligations, the bid deposit is forfeitedto compensate the project owner.
3. Why Option A is Correct:
Theprimary purpose of a bid deposit is to guarantee that the bidder will honor their bid if selected.
4. Why Other Options Are Incorrect:
B (Ensures fair consideration)– Incorrect;bids are evaluated based on merit, not bid deposits.
C (Indicates a serious bid)– While true,the key purpose is financial assurance, not just seriousness.
D (Covers evaluation costs)– Incorrect;bid deposits do not pay for the evaluation process.
[Reference:, Ontario Public Procurement Guidelines – Use of Bid Deposits & Bonds, Canadian Construction Documents Committee (CCDC) – Rules on Bid Deposits, ]
