LAW
How secure is your Security?
There are countless numbers of performance securities in existence on construction projects, which are provided on a daily basis. But given the current situation in financial and insurance markets their efficacy has to be called into question - because that efficacy is predicated upon the existence of a robust banking and financial system. Martin Collingwood considers the options and how you can protect yourself.
One of the commonest methods of securing performance and constructions contracts, whether main contract or sub contract or PPP-PFI schemes, is the provision by the contractor or sub contractor of a performance bond, usually for a limited percentage value of the relevant contract—somewhere between 10 and 25% - although higher in some jurisdictions.
Such performance securities are used both nationally and internationally either as a sole security for performance or in conjunction with some other form of security for example parent company guarantees, payment terms or warranty deeds.
PERFORMANCE BONDS OR GUARANTEES
Performance bonds or guarantees are procured from a variety of institutions ranging from banks through insurance companies to specialist surety companies.
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