9 Warning Signs Every Contractor Should Know

1. UNIDENTIFIED SURETY PROVIDER – You are asked to pay before knowing which surety will actually issue your Performance Bond.

2. EXCESSIVE AUTOMATIC OVERRUN FEES – Substantial quarterly charges apply after 365 days, even when the bond is intended to remain in force until Practical Completion.

3. UNDISCLOSED CONTRACTUAL AGREEMENTS – You are expected to accept additional payment agreements without being given the full terms upfront.

4. 100% FEE RETENTION CONDITIONS – The intermediary claims the right to retain your entire payment in certain circumstances, even if no bond is issued.

5. QUESTIONABLE ADMINISTRATIVE CHARGES – Multiple fees for bond management, reminders, technical assessments and other services without a clear explanation.

6. UNEXPLAINED THIRD-PARTY COLLECTING AGENTS – Another company becomes involved in collecting your money or imposing charges without its role being clearly explained.

7. NO CONFIRMATION OF EMPLOYER ACCEPTANCE – You risk paying for a bond from a surety your employer may not accept.

8. UNCLEAR SURETY PREMIUMS AND BROKER FEES – You cannot establish which charges are imposed by the actual surety and which are additional intermediary fees.

9. ONE-SIDED CONTRACTUAL TERMS – Broad rights to amend conditions, retain payments or impose further requirements leave the contractor financially exposed.

These Are Not Normal Features of a Straightforward Surety Arrangement

At Surety Bonds and Guarantees (SB&G), we are concerned about highly restrictive and potentially disproportionate terms appearing in Performance Bond quotations.

We have reviewed a quotation containing a combination of these conditions which, in our professional opinion, fall well outside the transparent and commercially reasonable arrangements contractors should ordinarily expect.

A conventional surety process involves assessing the contractor, underwriting the risk, agreeing any necessary security and issuing the bond once the conditions are satisfied.

Contractors should not assume that every charge or condition imposed by an intermediary is a requirement of the underlying surety.

Here is why these warning signs matter.

1. Unidentified Surety Provider

The surety is the company actually guaranteeing your contractual obligations. You should know who that provider is before committing substantial funds.

Many employers have approved lists of acceptable sureties. Even a financially strong provider may be rejected if it is not on that list.

The risk: You could pay a considerable sum only to discover your employer will not accept the proposed bond.

2. Excessive Automatic Quarterly Overrun Fees

Performance Bonds are generally quoted on one of two bases:

Fixed Period: The bond is priced for an agreed period, often expressed annually. If the bond needs extending, an additional premium may apply, commonly calculated on a pro-rata basis to reflect the additional period of cover.

Until Practical Completion (PC): The bond is intended to remain in force until Practical Completion, or another agreed expiry point, for an agreed fee. Depending on the surety's terms, a long-stop date or reasonable overrun period may be allowed without further charge.

Construction delays are common. Poor weather, material shortages, variations and employer-related delays can all affect completion. Reputable sureties will generally consider the circumstances, and where a substantial extension justifies an additional premium, this should be clearly explained and reasonably calculated.

What concerns us is a quotation that appears to combine the least favourable elements of both arrangements.

The bond wording refers to expiry upon Practical Completion, yet the initial fee only covers 365 days. After that, a substantial fixed charge becomes payable every quarter until the required employer confirmation is received.

These charges are not calculated pro-rata according to the number of additional days or as a proportionate extension of the original fee. They are fixed quarterly amounts, regardless of the reason for the delay.

Consider an illustrative example:

• Initial arrangement fee: £50,000
• Initial charging period: 365 days
• Automatic quarterly overrun charge: £15,000
• Four additional quarters: £60,000 in further charges
• Potential total cost: £110,000

That means a single quarterly charge represents 30% of the original annual arrangement fee, with no clearly stated relationship to the underlying surety's actual extension premium.

Worse still, further charges may arise simply because the employer has not provided the required written confirmation that the bond is no longer needed.

The risk: A contractor could face tens of thousands of pounds in additional charges for genuine construction delays, or while awaiting employer paperwork, even though the bond remains in force under its agreed wording.

This is not a charging structure we recognise as normal practice in the established surety market. Contractors should treat automatic, substantial, non-pro-rata quarterly charges as a major warning sign.

And the most important question remains:

Is the underlying surety actually requiring these additional payments, or are they separate charges imposed by the intermediary?

These are two very different things, and every contractor should know the answer before paying.

For more information about how bond duration, expiry and pricing work, read our guide to Performance Bonds.

3. Undisclosed Contractual Agreements

Deeds of Indemnity and Personal Guarantees can be legitimate surety requirements.

However, contractors should be extremely cautious when quotations refer to separate Contract to Pay Agreements or other binding documents that have not been supplied for review.

The risk: You could commit money before understanding additional charges, payment obligations or personal liabilities.

All material contractual terms should be available before you are expected to commit.

Our Bond Security guide explains how indemnities, personal guarantees and other security requirements can form part of genuine surety underwriting.

4. Retaining 100% of Your Payment Without Issuing a Bond

Some quotations contain conditions allowing the intermediary to retain the entire upfront fee in specified circumstances, even if no bond is issued.

Legitimate work may justify reasonable, clearly agreed charges. But claiming entitlement to retain tens of thousands of pounds without providing the intended security raises serious questions about fairness.

The risk: You could lose a substantial payment and still have no Performance Bond.

Always check the cancellation and refund conditions before paying.

5. Excessive or Unexplained Administrative Fees

Surety underwriting involves assessing financial information, contractual obligations and the risk being guaranteed.

Yet some quotations include extensive lists of additional services such as bond management, reminder fees, technical assessments, legal coordination and site inspections.

These activities may sometimes be legitimate, but they are not automatically separate charges required by every surety.

The risk: You could pay significant additional fees for services that are unnecessary, duplicated or poorly explained.

Ask exactly what each charge covers and who is providing the service.

To understand the genuine assessment process, read our guide to Surety Underwriting.

6. Unexplained Third-Party Collecting Agents

Some arrangements introduce another company to collect fees or manage ongoing payments.

There may be legitimate reasons for this, but contractors should understand who that company is, its relationship with the intermediary and whether it is acting for the surety.

The risk: If something goes wrong, it may become unclear who holds your money or is responsible for dealing with a refund or dispute.

A separate collecting agent should never be mistaken for a standard surety underwriting requirement without explanation.

7. No Confirmation That the Employer Will Accept the Bond

An employer may insist on a particular bond wording or an approved surety provider.

If the proposed provider has not been identified or checked, the contractor risks purchasing something that does not satisfy its contract.

The risk: You could pay for a bond arrangement that your employer rejects, potentially leaving you facing further costs or a dispute over your initial payment.

Confirm employer acceptance before making substantial financial commitments.

8. No Clear Distinction Between Surety Premiums and Broker Charges

The cost of a Performance Bond may include the underlying surety premium and separately agreed intermediary charges.

But these should not be confused.

If substantial additional payments or recurring fees are demanded, contractors should know who requires them and why.

The risk: You could mistake an intermediary's own commercial charges for unavoidable fees imposed by the surety.

A broker's charging conditions are not automatically the underwriting conditions of the surety providing the bond.

9. One-Sided and Restrictive Contractual Terms

Watch for broad rights to change conditions, retain payments or impose additional requirements, particularly where the contractor has little certainty over what happens if the transaction does not proceed.

The risk: You may accept substantial financial obligations without having equivalent clarity or protection over the services and security you are purchasing.

The responsibilities of both parties should be clear and understood before payment.

Protecting Contractors and the Reputation of the Surety Industry

The UK surety market plays an important role in supporting construction projects, and many reputable providers and intermediaries operate to professional standards.

Not every bond is straightforward, and genuine underwriting requirements, additional security or extension premiums can be entirely reasonable.

What should never be accepted without question are unexplained charges, missing contractual information, uncertain payment arrangements or disproportionate financial obligations presented as though they are ordinary surety requirements.

At SB&G, we believe transparency, fair treatment and clear commercial terms are fundamental to maintaining confidence in the industry.

For further guidance on bond security, underwriting and contractual requirements, visit The Hub – SB&G's Surety Knowledge Centre.

Received a Performance Bond Quote? Unsure About the Terms? Let SB&G Review It.

If you have received a quotation containing any of these warning signs, or you are simply unsure whether the fees and conditions are reasonable, speak to us before making payment.

Our specialist surety team can review your quotation, explain the terms in plain English and discuss whether alternative arrangements may be available.

There is no need to accept terms you don't understand without asking questions first.

Performance Bond Enquiries – Request a Review or Quote

Call our specialist team: 02476 017 646

Email your quotation for review: info@sbandg.co.uk

Surety Bonds and Guarantees (SB&G)

Specialist UK Surety Bond Brokers – Helping contractors understand their options and obtain appropriate bond terms.