How bid bonds work on Canadian construction tenders: the CCDC 220 – 2024 bid bond, consent of surety and pre-qualification letters, federal PWGSC-TPSGC 504 bid security, and the Supreme Court of Canada's Contract A rules from Ron Engineering and M.J.B.
Education only / verify at source / not legal advice. This guide explains how bid security works on Canadian construction tenders, using the standard CCDC 220 – 2024 bid bond, the federal PWGSC-TPSGC 504 bid bond and two Supreme Court of Canada decisions as reference points. Every tender package is different, and the tender documents and the bond actually issued always control. Global Guarantors publishes industry education. We aren't a surety, broker or law firm, and we don't publish premiums. Speak with your surety broker and licensed counsel about any specific tender.
Start here: Surety 101 · Glossary · Public owner's guide to accepting bonds
A construction tender in Canada is more than a price on a form. When a contractor submits a compliant bid, Canadian law treats that submission as creating a contract of its own, separate from the construction contract that may follow. The owner wants to know that the low bidder will actually sign and will actually deliver the performance bond and labour and material payment bond the tender calls for. The bidder wants to know that the owner will play by the rules it published. Bid security sits in the middle of that bargain.
The most common form of bid security is the bid bond, a three-party surety instrument issued by a licensed surety. The Surety Association of Canada calls it "the most commonly used risk management tool at the tender stage." The industry standard form is CCDC 220 – 2024, published by the Canadian Construction Documents Committee alongside the CCDC 221 performance bond and CCDC 222 labour and material payment bond. Some owners also ask for a consent of surety (often called an agreement to bond), and some ask for a non-binding pre-qualification letter earlier in the process. Federal construction tenders use their own form, the PWGSC-TPSGC 504 bid bond.
This guide explains each instrument, walks through what the 2024 bid bond actually says, sets out the Supreme Court of Canada's "Contract A / Contract B" framework that gives bid security its teeth, and closes with practical checklists for owners and bidders.
Like every surety bond, a bid bond has three parties:
| Party | On a bid bond | What they want |
|---|---|---|
| Principal | The bidding contractor | To compete for the work without tying up cash as a deposit |
| Obligee | The owner calling for tenders | Assurance that the low compliant bidder will sign and deliver the required bonds |
| Surety | A licensed surety company | To support a client it has already underwritten as bondable for the work |
The surety's promise runs to the owner, but the surety expects the contractor to stand behind it. As the Surety Association of Canada puts it, if a contractor does not enter into the contract after posting a bid bond, the result is "a claim against the bond for which the contractor will be held responsible (corporately and usually personally) for reimbursing the bonding company." That reimbursement duty comes from the contractor's general indemnity agreement with the surety, which is why bid bonds are an underwriting decision rather than a formality. Our guide to surety versus insurance and the general indemnity agreement explains how that indemnity works.
SAC also makes a point that owners sometimes miss: a surety will issue a bid bond only for a contractor it is prepared to bond for the full job. In SAC's words, "for a surety to provide a bid bond for a contract, the contractor must be pre-qualified and must meet the surety's criteria to be bondable from a performance perspective." In practice, then, a bid bond tells the owner two things at once: the bidder is serious about its price, and a surety has already looked at the bidder's capacity, finances and experience for work of this size.
A bid bond is narrow by design. It does not guarantee the quality of the bid, the bidder's eventual performance, or payment of trades and suppliers. Those risks belong to the performance bond and the labour and material payment bond that follow award. If the bidder signs the contract and delivers the specified bonds, the bid bond's job is done and, in the form's own words, "this obligation shall be void."
A bid bond also isn't insurance for the owner's general procurement risk. It responds to one event: a bidder whose bid was accepted in time failing to sign or failing to provide the required bonds. It pays a measured amount (the extra cost of the next contract, discussed below), capped at the bond amount.
The Surety Association of Canada describes "three common forms of surety used at the pre-tendering or tendering stage." They are often confused, and tender documents sometimes ask for more than one.
| Pre-qualification letter | Consent of surety (agreement to bond) | Bid bond (e.g., CCDC 220 – 2024) | |
|---|---|---|---|
| What it is | A letter from the surety to the owner confirming the contractor's "bondability" | A commitment by the surety to provide the final bonds if the contractor is awarded the contract and signs it | A three-party bond backing the bidder's promise to sign and deliver the required bonds |
| Legally binding? | No. SAC: "not a bond, nor is it a legal commitment" | Yes, but SAC: "not a true bond as it is only executed by the surety, not the contractor" | Yes. SAC: "a legal instrument, enforceable by law" |
| Who signs | Surety | Surety | Principal (contractor) and surety |
| Typical stage | Request for qualifications (RFQ) or expression of interest (EOI) | With the bid | With the bid |
| Protects the owner if the bidder walks away? | No | No. SAC: "not an assurance that the contractor will enter into the contract, nor that the contractor will enter into the contract at the price quoted" | Yes, up to the bond amount, by paying the extra cost of contracting with another party |
| Standard form? | SAC publishes a standard pre-qualification letter | No CCDC standard; SAC told owners in June 2024 a template "was discussed, but there are no plans to adopt one at this time" | CCDC 220 – 2024 (SAC-approved); some owners still use SAC or owner-drafted forms |
Many Canadian tenders ask for a bid bond and a consent of surety. The two do different jobs. The bid bond protects the owner if the low bidder refuses to sign. The consent of surety protects the owner against a different gap: a low bidder that is willing to sign but cannot get its performance and payment bonds. Taken together, they tell the owner that the bidder will sign and that its surety has already committed to bond the job, subject to the terms of the consent.
SAC notes that a surety stepping back from a consent of surety is unusual: "it is likely that new and significant information has come to light between the bid and award phase." Because there is no national standard form, owners and bidders should read each consent's conditions carefully. Look at what it covers (performance bond, payment bond, or both), the bond amounts, how long it stays open, and any conditions on the surety's promise.
The CCDC 220 – 2024 bid bond is a short, one-page instrument. CCDC sells its documents only through authorized document outlets, and a registration number is required to download the electronic version, so Global Guarantors does not reproduce the form. SAC publishes a specimen, and the key operative terms are summarized below with short quotations. Our CCDC 220 – 2024 wording record gives the source and purchase path.
The heart of the bond is its condition. If the principal's bid is accepted within the Validity Period and the principal:
then the bond is void. Otherwise, the principal and surety "will pay to the Obligee the difference in money between the amount of the bid of the Principal and the amount for which the Obligee legally contracts with another party for the work, supplies and services which were specified in the said bid, if the latter amount be in excess of the former."
Three features of that sentence matter in practice:
The 2024 form introduces a defined term, the Validity Period, meaning "the time period prescribed in the Obligee's bid documents for acceptance of the bid, or, if no time period is specified in the Obligee's bid documents, sixty (60) calendar days from the closing date of the bid."
It also deals with extensions directly. By agreement between the principal and the owner, the Validity Period "may be extended by up to sixty (60) calendar days without notice to the Surety. Further or longer extensions of the Validity Period require prior consent of the Surety."
| Step | What happens | Under CCDC 220 – 2024 |
|---|---|---|
| 1 | Tender closes | The Validity Period starts from closing if the bid documents don't set their own period |
| 2 | Owner evaluates bids | Bid must be accepted within the Validity Period |
| 3 | Owner and bidder agree to extend | Up to 60 more calendar days without notice to the surety |
| 4 | A longer extension is needed | Surety's prior consent required |
| 5 | Bid accepted | Bidder must enter into the formal contract and give the specified bonds |
| 6 | Bidder signs and delivers bonds | Bid bond is void; performance and payment bonds take over |
| 6 (alternative) | Bidder fails to sign or bond | Owner may claim the extra cost of contracting with another party, after reasonable mitigation, up to the bond amount |
The specimen states that "any suit or action must be commenced within seven (7) months of the date of this Bond," and adds a sentence for Québec: "In the province of Québec, the coverage period of this bond expires seven (7) months after the date of this Bond." The bond also limits who can sue: "No right of action shall accrue hereunder to or for the use of any person or corporation other than the Obligee named herein," or the obligee's heirs, executors, administrators or successors.
On the specimen, both periods run seven months from the date of the bond, not from closing or award. That is a practical deadline on long evaluations, protests or re-tenders, so diarize it from the bond date. One caution for Québec: the Surety Association of Canada's commentary on the 2024 forms describes the Québec sentence as setting a "coverage period" of one year, which doesn't match the seven months printed on the specimen. Read the bond you are actually given, and ask counsel how Québec law applies to it.
Like the CCDC 221 and CCDC 222 forms, the 2024 bid bond includes signature blocks with addresses and email for the surety, the obligee and the principal. SAC explains that these are "for use in the event of a claim" and bring the bid bond into line with the performance and payment bonds.
The Surety Association of Canada's commentary on the 2024 forms identifies several changes in the bid bond. They are worth knowing because some owners' tender templates were written around the 2002 form, and some owners still accept or require older forms. Check each tender.
1. The "Tender Date" blank is gone. The 2002 form left a space for a tender date. SAC says this "created a great deal of confusion" about whether it meant the closing date, leading some owners to demand a bond addendum every time closing was extended, "and, in some cases, it resulted in tenders being disqualified." The 2024 form follows the U.S. approach and drops the date. To avoid mixing up two bids to the same owner, the job-description blank now prompts for the project name, location or address, and project number.
2. "Bond or bonds," not "security." The 2002 condition required the principal to give "the specified security." SAC points out that a surety cannot guarantee that a contractor will post a non-surety form of security, such as a bank irrevocable letter of credit. The 2024 wording requires the principal to give "such bond or bonds as may be specified in the Obligee's bid documents." If a tender calls for a letter of credit as contract security, owners shouldn't assume the bid bond backs delivery of it.
3. A defined Validity Period. As described above, the acceptance window is now defined, with a 60-day default and a 60-day extension that needs no notice to the surety.
4. Contact details for all three parties, to support claim handling.
5. A Québec clause in the suit-limitation paragraph, for consistency with the Civil Code of Québec.
The companion forms changed far more. SAC notes the CCDC 221 performance bond grew from a one-page, 600-word document in 2002 to a 13-page, 5,400-word bond in 2024, with built-in claim timelines. See the CCDC 221 – 2024 performance bond record and the CCDC 222 – 2024 labour and material payment bond record for those forms.
Canadian tendering law rests on a framework the Supreme Court of Canada set out in 1981 and has applied ever since. When an owner calls for tenders under formal tender documents, and a bidder submits a compliant tender, a contract can arise immediately. The Court called it Contract A. The construction contract that follows award is Contract B.
| Contract A (the tender contract) | Contract B (the construction contract) | |
|---|---|---|
| When it forms | On submission of a compliant tender, if the tender documents show the parties intended contractual relations | On acceptance of a tender and signing of the contract |
| Parties | The owner and each compliant bidder (one Contract A per bidder) | The owner and the successful bidder |
| Key terms | Bid is irrevocable for the stated period; both sides must enter Contract B if the bid is accepted; owner must treat bidders as the tender documents promise | Scope, price, schedule, payment, change and dispute terms |
| Security | Bid bond or bid deposit | Performance bond and labour and material payment bond (or other contract security) |
The practical point is simple. Bid security is the bidder's security for its obligations under Contract A. Performance and payment bonds are security for Contract B. The two Supreme Court cases below show each side of Contract A.
R. in right of Ontario v. Ron Engineering & Construction (Eastern) Ltd., [1981] 1 S.C.R. 111, decided January 27, 1981, is the starting point for Canadian tendering law. Justice Estey wrote for a unanimous five-judge panel.
The Ontario Water Resources Commission called for tenders for a water and sewage treatment plant. Ron Engineering submitted a tender of $2,748,000 on July 4, 1972, accompanied by a certified cheque for $150,000 as the required tender deposit. The tender documents said the deposit would be returned after the successful tenderer signed the contract and delivered the performance bond and payment bond. They also said the owner could keep the deposit if a tender was withdrawn, or if the signed agreement and bonds were not received within seven days.
At the opening, Ron Engineering's tender was the lowest of eight, and about $632,000 below the next lowest. At about 4:12 p.m., roughly an hour after the 3:00 p.m. closing, the contractor sent a telex saying it had omitted $750,058 for its own forces' work and general conditions, so its intended price was $3,498,058. It asked to withdraw without penalty. Later, it changed its position: it said it had not withdrawn, but that its bid could not legally be accepted because the owner knew of the mistake.
The owner sent the construction contract for signature. The contractor declined to sign, the owner kept the deposit and accepted the second-lowest tender, and the contractor sued to get its $150,000 back.
| Figure in the judgment | Amount |
|---|---|
| Ron Engineering's tender as submitted | $2,748,000 |
| Amount the contractor said it omitted | $750,058 |
| Price the contractor said it intended | $3,498,058 |
| Approximate gap to the next-lowest tender | $632,000 |
| Owner's consulting engineers' estimate, including profit | $2,744,700 |
| Tender deposit (certified cheque) | $150,000 |
The Ontario Court of Appeal had ordered the deposit returned. The Supreme Court reversed and restored the trial judgment for the owner.
The Court held that a contract, Contract A, "arose upon the submission of a tender between the contractor and the owner whereby the tenderer could not withdraw the tender for a period of sixty days after the date of the opening of the tenders." Its principal term "is the irrevocability of the bid, and the corollary term is the obligation in both parties to enter into a contract (contract B) upon the acceptance of the tender."
On the role of the deposit, Justice Estey was direct: "The deposit was required in order to ensure the performance by the contractor-tenderer of its obligations under contract A." The test for whether Contract A arose "must be imposed at the time the tender is submitted and not at some later date after a demonstration by the tenderer of a calculation error." At that moment, the tender as filed was the one the contractor intended to submit, and there was no error on its face. So the deposit "must therefore stand exposed to the risk of forfeiture."
The Court added a line that is still quoted in tendering disputes: "integrity of the bidding system must be protected where under the law of contracts it is possible so to do."
Ron Engineering involved a certified cheque, not a bond, but the same Contract A logic is generally applied to bid bonds. A bid bond is the surety-backed version of the same promise. Three lessons follow:
Eighteen years later, the Supreme Court looked at Contract A from the bidder's side. M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619, was decided April 22, 1999, with Justice Iacobucci writing for the Court.
Defence Construction Canada called for tenders for a pump house, a water distribution system and the dismantling of a water tank at Canadian Forces Base Suffield in Alberta. Four tenders were received. The lowest, from Sorochan Enterprises Ltd., included a handwritten note saying its unit prices assumed native backfill, and that if a different material type was required, "add $60.00 per metre." Other bidders said the note was a qualification that made the bid invalid. The owner treated it as a clarification and awarded the contract to Sorochan. M.J.B., the second-lowest bidder, sued.
The tender documents contained a common "privilege clause": "The lowest or any tender shall not necessarily be accepted."
The Court held that Contract A existed and that it carried an implied term: the owner could accept only a compliant bid. The bid security was part of the reason. The tender, the Court said, was a benefit to the owner, "prepared at a not insignificant cost to the appellant, and accompanied by the bid security." The Court also noted that tendering "replaces negotiation with competition which entails certain risks" for bidders, "such as the effort expended and cost incurred in preparing the bid, and the making of the bid security deposit," and that taking those risks "makes little sense" if the owner may accept a non-compliant bid.
On the privilege clause, the Court drew a clear line. The clause "is compatible with the obligation to accept only a compliant bid," but "incompatible with an obligation to accept only the lowest compliant bid. With respect to this latter proposition, the privilege clause must prevail." The owner breached Contract A by accepting Sorochan's non-compliant bid, and M.J.B. was entitled to damages measured by the profit it would have earned on Contract B.
Federal construction tenders issued by Public Services and Procurement Canada generally call for a government form rather than CCDC 220. Always check the solicitation on CanadaBuys, which sets the security it accepts. The PWGSC-TPSGC 504 bid bond is published on Canada.ca. Its key terms:
The CanadaBuys Buyer's Guide sets the policy framework for federal buyers. It describes three types of financial security: "offer financial security to protect Canada against loss if an offeror fails to enter into a contract," contract financial security, and payment bonds. Points worth knowing:
Provincial and municipal owners set their own rules, and some provinces prescribe their own final bond forms. In Ontario, for example, public contracts subject to the Construction Act's bonding rules use the prescribed Form 31 and Form 32 bonds after award, and the Act's prompt payment and adjudication regime governs payment once work starts. Our guide to prompt payment in Ontario and British Columbia covers that later stage.
Both CCDC 220 – 2024 and PWGSC-TPSGC 504 measure the owner's recovery the same basic way: the difference between the defaulting bidder's price and the price of the contract the owner actually signs with someone else for the same work, capped at the bond amount. CCDC 220 – 2024 adds an express mitigation condition.
The worked example below uses round illustrative figures only. It shows the arithmetic, not any real tender.
| Illustrative figures | Example A | Example B | Example C |
|---|---|---|---|
| Low bid (bidder refuses to sign) | $4,000,000 | $4,000,000 | $4,000,000 |
| Bond amount at 10% of bid | $400,000 | $400,000 | $400,000 |
| Replacement contract the owner signs | $4,150,000 | $4,600,000 | $3,980,000 |
| Difference | $150,000 | $600,000 | None (replacement is cheaper) |
| Claim under the bond, before any mitigation dispute | $150,000 | $400,000 (capped) | $0 |
SAC's owner webinar summarizes the usual outcome in plain terms: "If contractor defaults, surety pays the difference between successful bid and second bidder." Whether the second bidder's price is the right comparison depends on whether the owner reasonably contracted with that bidder for the same scope. A re-tender with a changed scope, or a long delay that inflates prices, can lead to disputes about mitigation. The surety will usually ask for the replacement contract, the tender results and the owner's evaluation record. For how bid, performance and payment bonds fit together from tender to completion, see our contract surety guide.
Canadian and U.S. bid bonds do the same job, but the defaults differ:
| Canada (typical) | United States (federal) | |
|---|---|---|
| Common forms | CCDC 220 – 2024; PWGSC-TPSGC 504 for federal work; some SAC or owner forms | SF 24 for federal work; AIA A310–2010 on many private projects |
| Typical amount | SAC: "typically" 10% of tender; federal 504: 10% to a $2,000,000 maximum | FAR 28.101-2(b): "at least 20 percent of the bid price but shall not exceed $3 million" |
| Default acceptance window | 60 calendar days from closing (CCDC 220 – 2024 and 504) unless the tender says otherwise | Set by the solicitation |
| Tendering law | Contract A / Contract B framework (Ron Engineering, M.J.B.) | Federal bid protests and procurement rules; state law varies |
The 2024 CCDC form deliberately moved toward the U.S. approach on one point: it dropped the tender-date blank. Global Guarantors' wordings library has records for the U.S. forms in the Related reading list below.
What is a bid bond in Canada? A surety bond submitted with a construction tender that backs the bidder's promise to sign the contract and provide the required bonds if its bid is accepted in time. If it doesn't, the surety and the bidder pay the owner's extra cost of contracting with another party, up to the bond amount.
How much is a bid bond in Canada? The tender documents set it. SAC describes bid bonds as "typically required in the amount of 10% of tender." The federal PWGSC-TPSGC 504 bond is 10% of the total bid to a maximum of $2,000,000. This guide does not cover premiums; ask your surety broker.
What is the CCDC 220 – 2024 bid bond? The Canadian Construction Documents Committee's standard bid bond, approved by the Surety Association of Canada. CCDC published it on May 21, 2024, replacing the 2002 edition, and pairs with CCDC 221 (performance) and CCDC 222 (labour and material payment).
How long is a bid bond valid? Under CCDC 220 – 2024, the bid must be accepted within the Validity Period: the period in the bid documents, or 60 calendar days from closing if none is stated. It can be extended by up to 60 more calendar days without notice to the surety; longer extensions need the surety's prior consent. Separately, the specimen requires suits to be started within seven months of the bond date. Check the issued bond, and in Québec read the coverage-period sentence, because SAC's commentary describes it as one year.
What is the difference between a bid bond and a consent of surety? A bid bond is signed by the contractor and the surety and protects the owner if the bidder refuses to sign. A consent of surety (agreement to bond) is signed only by the surety and promises the surety will issue the final bonds if the bidder is awarded and signs. It does not promise the bidder will sign.
Is a pre-qualification letter a bond? No. SAC describes it as "not a bond, nor is it a legal commitment." It confirms the surety's relationship with and confidence in the contractor, usually at the RFQ or expression of interest stage.
Can I withdraw my bid if I made a mistake? Before closing, tender documents usually allow withdrawal under their own procedure. After closing, under Ron Engineering, a compliant bid is generally irrevocable for the stated period, and a calculation error that isn't apparent on the face of the bid did not entitle the bidder to recover its deposit. Speak with counsel immediately in that situation.
Does a bid bond pay the full bond amount if the bidder walks away? Not automatically. It pays the difference between the bidder's price and the price of the replacement contract, if higher, subject to mitigation, up to the bond amount.
What is Contract A? The contract that the Supreme Court of Canada held arises when a compliant tender is submitted under formal tender documents. Its main terms are that the bid is irrevocable for the stated period and that both sides will enter the construction contract (Contract B) if the bid is accepted. The owner also takes on duties set by its tender documents, such as accepting only a compliant bid (M.J.B.).
Does a privilege clause let an owner accept any bid? No. Under M.J.B., a clause saying the lowest or any tender need not be accepted lets an owner decline the lowest bid, but it does not on its own allow the owner to accept a non-compliant bid.
Does the CCDC 220 – 2024 bid bond guarantee a letter of credit? No. It backs the bidder giving "such bond or bonds as may be specified in the Obligee's bid documents." SAC explains that a surety cannot guarantee non-surety security such as a bank letter of credit.
Retrieved or confirmed October 12, 2026 (PT).
