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Performance bond
A bank guarantee ensuring the principal that the contractor will perform the contract in accordance with its terms.
A performance bond is a bank guarantee issued in favour of the buyer/employer to cover the risk of non-performance or defective performance of the contract by the supplier or contractor.
Its amount typically represents 5 % to 10 % of the contract value. It remains in force throughout the contract period, and often during an additional warranty period (6 to 12 months after provisional acceptance).
The performance bond is called upon when:
- The supplier fails to deliver within contractual deadlines
- Goods or works do not conform to specifications
- The contractor abandons the site or ceases operations
- Maintenance or warranty obligations are not met
It is mandatory in most international public procurement and construction contracts. Its issuance is often a condition precedent to the contract.