This is the scenario the bid guarantee exists for, and it is worth being blunt about, because it is the most expensive thing that can happen to a contractor at the small end of surety.
The sequence
You bid. You win. The contract requires performance and payment bonds as a condition of award. Your surety, looking at the awarded scope rather than the estimate it saw at bid time, declines to write them.
The owner now does one of two things: it moves to the next acceptable bidder, or it re-lets the work. Either way it has a loss, and either way it calls your bid guarantee.
And then the part contractors do not expect. The bid guarantee is not your money. It is a surety’s undertaking, and when the surety pays the owner, you indemnify the surety. The call does not close the matter; it opens a debt.
Which is the fundamental asymmetry between a bid bond and cash bid security. Where an obligee takes a certified check — as Indiana’s Ind. Code § 5-16-5.5-2 and Oklahoma’s 61 O.S. § 1 both permit — the forfeited money is money you had. Where it takes a bond, the forfeiture creates an obligation you did not have before.
What it costs, federally
FAR 28.101-2(b) sizes the instrument rather than the loss:
“The bid guarantee amount shall be at least 20 percent of the bid price but shall not exceed $3 million.”
That is the ceiling on what the guarantee can be worth. The federal frame ties the requirement to the bonds themselves — FAR 28.101-1(a) requires a bid guarantee “whenever a performance bond or a performance and payment bond is required” — which is exactly why a solicitation asking for one is telling you the job is bonded work and your surety needs to be able to follow you.
What it costs, in the one state that says
Ohio is the exception that prices the outcome in the statute itself, and it does so two ways depending on what the owner does next: award to the next lowest bidder and the measure is the overpayment — the difference between your bid and theirs — capped at ten per cent; re-let the work instead and the measure becomes the administrative cost of running the procurement again, capped against the bid.
Two theories of loss for two owner responses, both capped, and which one applies is decided after you are already gone. The provisions themselves, and the reason the two caps are measured against different things, are set out in the Ohio bid guaranty guide.
One state lets you out
Ohio alone, in our reading, treats a bidder who has simply won more work than it can bond as something other than a defaulter. O.R.C. § 153.54(G) lets such a bidder withdraw — on a small public improvement, where another bid has already been accepted, and where the surety itself certifies that performing would exhaust the bidder’s bonding capacity. Both liability measures above are carved out for it, so a bidder inside the provision owes nothing.
What makes it unusual is not the relief but the evidence: the statute hands the capacity question to the surety and conditions the right on the surety being willing to answer it in writing. The conditions, the excluded agency and the reason the drafting is remarkable are set out in the Ohio bid guaranty guide.
Nothing equivalent exists federally. Under FAR 28.101 a bid guarantee is required because the bonds are, and running out of capacity between award and execution is your problem.
How the failure is actually avoided
The provisions above are remedies. The failure they remedy is nearly always the same and it happens before the bid.
A surety writing a bid bond is not underwriting the bid. It is underwriting the contract behind the bid, because the bid bond’s own exposure is precisely the cost of your failure to post the performance bond. A surety will not knowingly write a bid bond it would then refuse to follow.
So the useful conversation is the one where you tell your surety what you are about to bid, at what value, alongside what you are already carrying — and get a view on the whole thing rather than on the instrument in front of it. A contractor whose aggregate is nearly full is at risk on the second award of a season, not the first, which is exactly the situation Ohio wrote its subsection (G) around.
Where a single contract is larger than a surety’s single-job limit, Indiana’s Ind. Code § 5-16-5.5-2 offers a different route — incremental bonding, where multiple or chronological bonds together equal the total contract price, if the agency accepts it.
What this page does not cover
It does not state the bid-security rules for any state other than Ohio, and it does not address forfeiture of cash or certified-check security, which is governed by different provisions and different mechanics.
It also does not describe section 9.31 of the Ohio Revised Code, which § 153.54 names as a separate authorized reason for failing to enter into a contract and which we have not read.
