Contract Surety Bonds
Bid/Tender Bonds
This bond ensures that a contractor who submits a bid will enter into the contract and provide the necessary performance and payment bonds if awarded. It protects the project owner from financial loss if the winning bidder fails to honour their bid.
Typically, bid bonds are equivalent to 5% of the bid price and serve as a prequalification tool, indicating that a surety bonds underwriter has assessed a contractor's capabilities
Performance Bonds/Guarantees
A performance bond guarantees that the contractor will complete the project according to the terms and conditions of the contract. If the contractor fails to fulfil this obligation, the bond provides compensation to the project owner for any resulting financial losses.
The value of a Performance Bond typically ranges from 5% to 12.5% of the Contract Price and can account for more than 1% of total project costs.
Advance Payment Guarantee
An Advance Payment Guarantee is used when a buyer pays a supplier or contractor upfront before work begins or goods are delivered.
It protects the buyer's interests by ensuring they can recover the payment if the contractor fails to meet their obligations.
This guarantee is essential for large procurement or construction contracts involving significant upfront payments.
Retention Money Bond
This bond replaces the retention money usually withheld by the project owner until the project is completed. The total retention amount typically ranges from 5% to 10% of the Contract Price.
It guarantees that the contractor will rectify any defects or complete any outstanding work, allowing the project owner to release the retention money while still being protected by the bond.
Maintenance Bond
A maintenance bond guarantees that the contractor will repair any defects or issues that arise after the project is completed, usually within a specified maintenance period.
This assures the project owner that the contractor will take care of any necessary repairs or corrections.
