Ensuring performance

Question 1

3 ways to protect the employer

Answer 1

1. Insurance
2. Bonds
3. Retention Monies

Question 2

What are bonds?

Answer 2

The construction bond provides assurance to the project owner that the contractor will perform according to the terms stated in the agreement. Construction bonds may come in two parts on larger projects: One to protect against overall job incompletion, and the other to protect against nonpayment of materials from suppliers and labor from subcontractors.

Question 3

What is professional indemnity insurance?

Answer 3

Insurance that covers any costs you may face at work due to litigations. Such as being sued over a design

Question 4

what are the two main Insurance Provisions?

Answer 4

1. Loss or damage to the works
   +any unfixed materials and goods placed on or adjacent to the works
2. Personal Injury or death and injury to the property other than the works, which are due to the works

Question 5

What are the two types of insurance policies?

Answer 5

1. Liability insurance policy
   - Public liability policies
   - Professional Indemnity Policies
2. Loss Insurance Policy (Fire/theft)
   - Contractors all risk policy

Question 6

What is a bond?

Answer 6

an arrangement whereby the performance of contractual obligations of a party is backed up by a third party

Question 7

3 Forms of bonds

Answer 7

1. Advance payment bond
   2.Tender Bond
2. Retention Bond

Question 8

3 Parties to a bond

Answer 8

1. The principal debtor (Normally the contractor)
2. The beneficiary (The party to whom that obligation is owed)
3. The Bondsman

Question 9

Argument for bonds

Answer 9

can be useful where a company is no longer in business.
The employer is protected against unforeseen events
Materials can be obtained in full.

Question 10

Argument against bonds

Answer 10

There is a cost of insuring bonds, (costs vs retention?)
Correct selection and tendering process should ensure that a contractor won’t default.
If a bond is gotten from a bank then the companies over draft can be reduced.
A regular client may benefit from ‘taking the risk’ as it is less costly.

Question 11

What is a tender (or bid) bond

Answer 11

used to guarantee that contractor will submit a Bonafede tender. Used to guarantee they will stick to their price and sign the contract.

Question 12

what is an unconditional or first demand bond

Answer 12

They have spread from international contractors. These bonds enable the beneficiary to obtain the bond amount at any point even if there is no default of the contract.

Question 13

How are bonds incorporated into contracts?

Answer 13

Bonds will be outlined in the contract with specifics such as a timeline, and where the bond is coming from

Question 14

What affects to the contract does a bond have?

Answer 14

Due to the costs of a bond, a contractor may have to raise their tender price in order to cover themselves