Construction 

A Bid Bond is required during the tendering stage of a project. Its primary purpose is to provide the employer with assurance that, if the bidder is successful, they will execute the contract and provide the required surety or performance bond.

Contractors often require funds at the commencement of a project to cover various expenses, such as purchasing specialist equipment, site establishment, and employee costs. To secure these upfront payments, known as an ‘Advance,’ the employer typically requests an Advance Payment Guarantee.

This guarantee ensures that the contractor fulfills its contractual obligations regarding scope, schedule, and budget. If the contractor fails to meet these obligations and the employer incurs a loss as a result, a claim against the guarantee may be made.

This guarantee provides the employer with protection during the defects liability period, typically 12 months after project completion. Should any defects arise during this period, the contractor is obligated to repair them. If the contractor fails to do so, the employer may call on the guarantee. Alternatively, if the contractor does not provide a guarantee, the employer may withhold up to 10% of each payment certificate as retention monies.

Similar to an Advance Payment Guarantee, this guarantee applies when the employer provides an upfront payment to the contractor for the purchase of materials required for the project.