Performance Bonds

Performance bonds guarantees to provide financial security

Performance Bonds are not an insurance policy as such; they are a financial ‘tool’ provided by an insurer that provides the Beneficiary (sometimes referred to the contractee or obligee) with a financial sum should the business (the Principal or Sub-Contractor) default on contractual obligations.

Performance bonds are usually found within construction-related contracts and included in the risk management strategy, ensuring the project can still be finished.

The terms of the performance bond are determined within the contract and tender documentation, but also by the insurer (the surety) in terms of what they are comfortable underwriting. Our team can review on your behalf for insurer terms more suitable to your particular needs. Our bond brokers are experienced in arranging performance bonds and have relationships with insurers who can provide Performance Bonds; you can be confident that with Cox Mahon your financial obligations can be granted, allowing you to enter the tender process.

Advance payments

If the client agrees to make an advance payment (sometimes referred to as a down payment) to a supplier, a bond may be required to secure the payment against default by the contractor. This is referred to as an advance payment bond (APB), advance payment guarantee or advance stage payment. This is often used as a security that specialist equipment that may be needed to be paid for up front.

Performance

Mostly used in the construction and service industry and is a percentage (usually between 10 and 20%) of the contract value and provided to an employer against loss or damage in the event of a contractor or supplier failing to perform to the terms of the contract. These types of contractual obligations are commonplace – worldwide.

Restoration and Reinstatement

Mostly used by Waste Management, quarrying and mining/extraction companies, these are required by a local authority or the Environmental Agency, guaranteeing the restoration of land to agreed standards after the work has been completed.

Road and Sewer (or Section Bond) Performance Bonds

Used in Planning and Highways, Road and Sewer Bonds, these are normally utilised by Property Developers or House builders, as guarantees on behalf of a property developer or house builder that it will be complete the roads and sewer to enable them to be adopted by the appropriate local authority under the relevant Highways Act or Water Industry Acts.

Retention

Predominantly relate to the Construction Industry as most construction contracts entitle the employer to withhold a percentage of money at each certified payment during the contract. The contractor can provide a bond as an alternative and obtain the full amount of certified payments.

VAT and Duty Guarantee

These guarantees cover the payment of Duty and VAT due to HMRC which provides them with protection against payment default or company insolvency.