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Building Contractors often ask us the question: When is a Performance Guarantee called on? When your company starts bidding on projects for cities, provinces or municipalities, you’ll be expected to provide assurance that you can meet the obligations detailed in the Contract.

This assurance comes in the form of a Performance Guarantee. Basically, what happens is that a surety company (an insurer or bank), for a certain fee, steps in and guarantees your performance. Surety companies don’t work directly with Contractors. Instead, they partner with brokerages like us.

So, when is a Performance Guarantee called on?

A Performance Guarantee is typically arranged before the start of the Contract, when the relationship between parties is good. In contrast, calls on Performance Guarantees are usually made after negotiations fail and communication has broken down. It’s little wonder that demands on Performance Guarantees are frequently opposed and challenged.

If the Contractor doesn’t complete the project, or if the work is not up to the promised quality, the Employer can make a claim against the surety company that issued the Guarantee. The surety company will investigate, and if they find that the Contractor did fail to perform, they will award damages to the Employer in line with the cost of the Contractor’s failure.

Of course, the Contractor doesn’t get off scot free. They will then have to pay the surety company back in full.

The cost of a Performance Guarantee is based on a variety of factors, including the scope of the Contract Works and the Contractor’s creditworthiness (the surety company will want to make sure the Contractor can pay back the guarantee amount if necessary).

Even though all this may sound complicated, A Performance Guarantees is not too difficult to get. We’d be happy to answer any questions you may have and to walk you through the application process. Just complete this form and we’ll get in touch.

← Four types of Contract Guarantees and What They Insure Get your Letter of Intent almost instantly →

What is Construction Bidding?

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Construction bidding is the process of submitting a proposal/tender to build or manage a construction project. Public tenders, or those with a government department, follow different rules than private tenders. They must be advertised in advance, and they allow any qualified contractors to bid if they choose to. Private owners may opt to limit the construction bidding process to contractors they have chosen as bidders.

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Understandably this can be a challenge as there is a myriad of cover available in the construction insurance landscape.

Let’s quickly unpack 5 Construction Insurance options for you.

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A Performance Guarantee is a contractor’s promise to complete the construction project within the deadlines, while meeting all contractual conditions.

Get your Letter of Intent almost instantly

by Dan Payton | September 5, 2018 | Guarantees, Tenders | 0 Comments

The term ‘Letter of Intent’ (LOI) is typically used to describe a letter from an Employer to a Contractor (or from a main Contractor to a Subcontractor) indicating the Employer’s intention to enter into a formal written contract for Works described in the letter, and asking the Contractor to begin those works before the formal Contract is executed. While an Letter of Intent may come in many forms, it’s essentially a communication expressing an intention to enter into a Contract at a future date.

How do you get a Performance Guarantee?

by Dan Payton | July 23, 2018 | Guarantees | 0 Comments

When applying to get a Performance Guarantee, you’ll have to answer basic questions about your professional work experience and your company’s financial history. If your business has more than one owner, the financial credentials of all owners must be submitted.

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Are you tired of not winning tenders? Here are some practical tendering tips to help you win a tender and comply with construction industry standards.

Bank Guarantee to Fuel Guarantee

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by Dan Payton | August 23, 2018 | Guarantees | 0 Comments

Contract Guarantees in the construction, engineering, manufacturing and mining service industries are almost mandatory. Our range of Construction Guarantees are as varied as your requirements. Here’s a short list of the four types of Contract Guarantees and what they insure.

What’s the difference between a Performance Bond and a Performance Guarantee?

by Dan Payton | July 23, 2018 | Guarantees | 0 Comments

The term Performance Bond is often misleading, which can leave contractors confused about the difference between a performance bond and a performance guarantee. Most construction Performance Bonds are actually Guarantees. Bonds and Guarantees are related but are different. The right to claim under a Guarantee is linked to non-performance of the underlying contract. Under a Bond, the bank usually pays on demand regardless of the underlying contract.