Performance Bonds

Performance Bonds / Contract Bonds are a type of Surety Bond and are written promises to pay for direct loss or damage suffered by a third party as a result of a breach of contract and are typically issued for 10% of the contract value. 

Performance Bonds are common in construction projects and protect the Employer against the Contractor failing. 

A Performance Bond is issued in favour of the Employer and provides a fixed amount which can be claimed upon should the Contractor fail.

The Bond is put in place at the start of the Contract and will run until Practical Completion or Making Good of Defects. Once the designated expiry has been reached the Bond automatically expires.

The simple answer to this is, Yes, we can supply Bonds to all companies, new and old, we can even issue Bonds for JV's and SPV's. Our wide range of providers allows us to find the best possible solution depending on your circumstances.

This question is hard to answer as there are so many variables, but it can typically be from 3% to 10%* of the Bond amount using a fixed rate but some Surety markets quote per annum too and some have minimum premiums to factor in. Our team can give you an instant indication over the phone for any tenders enabling you to price these competitively and quickly.

*(we have seen higher and lower but this is the most common range)

All Bonds, without exception, ask for some level of security or collateral from the applicant. This is a minimum of a Company Indemnity but can be higher depending on the Bond amount and other underwriting factors. However we will always aim to get you the best option with the lowest security and avoiding Personal Guarantees or Cash Deposits where possible.

The most common type of Performance Bond we are asked to issue is an ABI Performance Bond, this is the standard form of Bond and is found in JCT Contracts. This type of Construction Performance Bond is tried and tested, it is fair to all parties and pays upon quantified losses.

On Demand Performance Bonds, as the name suggests pays On Demand from the Employer and typically the Surety has only 5 working days, or less, to settle any claim. While we do place these Bonds regularly it is important that the Contractor is aware of the nature of this type of Bond as any Collateral given could be enforced if the Surety is Demanded to pay the Employer.

Construction Performance Bond wordings can be altered by Solicitors which then form Conditional Performance Bonds in many variants to the standard ABI Performance Bond and we can support any type of wording required including, On Demand variants, Adjudication Wordings and any Hybrid Wording for both JCT and NEC Contract requirements. If you are unsure on the wording we will advise you and provide support in understanding your obligations. In addition some other bonds such as Bid Bonds could be requested but are less used in the UK.

Often the requirement to provide a Performance Bond is contractual and requested as part of the tender process. However, some contractors offer them on all projects as a way to stand out over their competitors. Having the backing of a Surety provider gives confidence to the Employer that the contract will be completed or if not that there is some recourse available to them should the Contractor fail.

The UK Surety market is complex and a specialist broker with knowledge and expertise to help guide you throught the process is essential. As a leading provider of All Surety Bonds in the UK, we are able to Bond any size contract and consider any type of wording. We have access to exclusive markets and work for you to obtain the best terms with the lowest security.