Certified Professional Public Buyer (CPPB) Practice Test

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Bid bonds are typically used in contracts to ensure?

The project will receive government funding
The contract will be accepted as bid
The project will not exceed the budget
The contract will be fulfilled regardless of cost increases

The correct answer is: The contract will be accepted as bid

Bid bonds serve a specific function in the bidding process, providing a financial guarantee that the contractor will accept the contract under the terms they proposed in their bid. When a bid bond is included in a contract, it underscores the commitment of the contractor to enter into the contract if they are awarded the job. The amount of the bid bond typically ranges from 5% to 10% of the bid price, and if the contractor fails to accept the contract after winning the bid, the bond amount can be forfeited as a penalty. This is critical in the procurement process because it protects the owner from the risk of a contractor backing out, ensuring that the bidding process remains serious and competitive. The other options relate to project funding or budgetary constraints, which are not the primary concerns of a bid bond. While aspects of project management such as budget control and funding assurance are important, they fall outside the exact purpose of what a bid bond is designed to accomplish.