warmest regards to all. i have a question...

[arkitekto]

Hi to everyone. I am Ding and I come from the Philippines.

I am a newbie at bonds and have a few construction questions:

1. Is surety bond the same as performance bond? Or performance bond is a subset or type of surety bond?

I am currently reviewing a subcontract agreement which states that the Nominated Sub-contractor shall submit to the Contractor a Downpayment Surety Bond to the amount of xxxx and a Performance Bond of the same amount in favor or Owner and/or the General Contractor. It further states that said bonds shall be valid up until one (1) year after scheduled contract completion.

which brings me to the next question-

2. For how long is a Performance Bond required in a contract? Is it proper to require it still one year after project completion?

As I understand it, the Performance Bond is required only until contract completion; a Guarantee Bond then comes into the picture to cover repairs during the Defects Liability Period. Am I right or wrong?

3. I do not know if it is just a matter of terms but is Bid Security same as Bid Bond?

Thank you very much for your time.

Regards, God bless, and all the best,

Ding

[bondman]

Hello Ding

Yes a performance bond is a type of Surety Bond. A Surety bond can be classed as 'default' or 'on demand' depending on the text of the bond.

The validity of the perfomance bond is a commercial issue. Its not uncommon for performance bonds to be valid to cover the defects liability period under a contract but you have not said what percentage of the contract your performance bond will be for. If you issue a separate 'warranty' bond you may be issuing it for a lower percentage. For instance it may be reasonable, if you have issued a 10% performance bond to have that valid until Practical Completion and then replace it with a 5% Warranty bond for the 12 months.

A Bid bond is one form of Bid Security. There are others such as certified check or bank draft. Again it is a commercial decision as to what form of security you wish to provide.