Bid Bonds
A Bid Bond is purchased when a Contractor is bidding on a tendered Contract. Bid Bonds pre-qualify the Contractor and provide security to the Employer/Owner by guaranteeing that the Contractor will enter into the Contract if it’s awarded.
We offer affordable & flexible Bid Bonds, with solutions for all segments of the civil & construction industry – from the small bakkie-builder, right up to large, national companies.
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Get All The Benefits Of Our Bid Bonds
Tender on Bigger Projects
Unlike Bank Bonds, we don’t require 100% collateral when issuing Bid Bonds. With cash collateral requirements of only 7–15%, our Guarantee facility allows you to free up your cashflow and tender on bigger contracts.
Ensure Your Tender's Success
When issuing Bid Bonds, the Guarantor/Insurer agrees to back you and become your co-principal debtor. This means you’ll then have a third-party’s professional opinion of your ability to perform, enter into and complete the project.
Get Your Tender Submitted Without Delay
Once your initial Guarantee facility has been approved, you can be assured of a fast and seamless process when requesting Bid Bonds for all your future tenders.
Pay Less Tax
Both the Performance Guarantee & the contingency premiums are considered insurance expenses and are therefore deductible for company tax purposes.
Save For A Rainy Day
Your Collateral Funds (Contingency Premium), reserved by the Insurer, will earn investment income at current interest rates. Should your Bid Bonds be returned, expire, or your facility cancelled, your Contingency Premium will be returned to you, inclusive of interest earned. The Contingency fund also allows you to accrue reserves for unforeseen risks on a particular project, or to allow yourself additional capacity for future tenders.
Save Time and Resources
There’s no need to go in search of a supplier for your other insurance needs. We offer a full range of niche insurance products at exceptionally competitive rates.
Frequently Asked Questions
What happens if the contractor fails to enter into the contract?
In essence, Bid Bonds provide a guarantee that the Bidder (Contractor), if awarded the Contract will enter into the said agreement and furnish the prescribed Performance Bond. A cash deposit is required which is subject to full or partial forfeiture if the winning contractor fails to either execute the Contract or provide the required performance and/or Payment Bonds.
What documents should I have prepared for the application
- Company profile (including an organogram and copies of the current and previous contracts)
- Two years’ financial statements and three months’ bank statements
- Letter of appointment
- Contract information
- Guarantee wording requirements
- Company registration documentation
- Copies of all members’ identity documents and income tax numbers
- Copy of letterhead
- Tax clearance certificates
- CIDB certificate
What will the guarantor look at when assessing my application?
All applications are subject to a thorough analysis to establish the Contractor’s risk profile. This will include an assessment of the Contractors’ financial standing and their resource capabilities to fulfill the Contract obligations.
For Corporate Clients, emphasis is placed on:
- the financial standing of the Contractor
- the company structure and shareholding
- the Contract information
- the Guarantee wording requirements
- the securities available
What Could Trigger A Claim?
Liquidation of the contractor
Liquidation of the Contractor’s business is one of the most common reasons for a Bid Bond to be called up. Liquidation automatically places the Contractor in default of the contract or tender and will thus trigger a claim for the Bid Bond.
The Employer needs the project to be completed and will have to arrange for a replacement Contractor and may need to put the Contract out to tender again. This causes delays and an inevitable increase in costs.
Contractor expressly refuses to perform its obligation
After being awarded with the Contract, if the Contractor is unable to supply the performance and/or Payment Guarantees required in the contract, the contractor will be in default and the Bid Bond will be called up.
Breach of contract by the contractor
Example:
Eskom Holdings Soc Ltd v Hitachi Power Africa (Pty) Ltd and Another (139/2013) [2013] ZASCA 101 (12 September 2013)
Eskom presented three performance guarantees for payment – a number of disputes had arisen between the parties concerning the performance by Hitachi of its obligations under the construction contract. Eskom alleged that Hitachi had been guilty of material and ongoing breaches of the construction contract. It complained that Hitachi had delayed the completion of the first operating unit at Medupi. It also claimed that in view of the said material breaches, it was entitled to demand payment under the guarantees.