Bid Bond

A bond given by a bidder for a supply or construction contract to guarantee that the bidder, if awarded the contract within the time stipulated, will enter into the contract and furnish the prescribed performance and/or payment bond. 

Default will ordinarily result in liability to the obligee for the difference between the amount of the principal's bid and the bid of the next low bidder who can qualify for the contract.  In any event, however, the liability of the surety is limited to the bid bond penalty.