Security Flashcards

1
Q

Explain the requirement for security as defined in the ABIC contract?

A

Security is cash that is put aside as an assurance that the contractor will meet its obligations under the building contract.

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2
Q

Who provides security under the ABIC contract and to whom?

A

The Contractor provides security to the owner.

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3
Q

What are the types of security available under ABIC?

A

Cash retention or Bank Guarantee.

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4
Q

What is a bank guarantee and what is its purpose under the terms of the ABIC contract.

A

A bank guarantee is a percentage of the contract price (usually 5%) which is held in an account of recognised financial institution approved by the owner, and is held under the owner and contractor’s names. The contractor gives the owner 2 equal bank guarantees (2.5% each) 10 days following the signing of the contract. Only the owner can access the funds with written consent from the contract administrator/architect.

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5
Q

What is a retention fund under ABIC? What is its purpose and how does money get placed in this fund.

A

A retention fund is another form of security held by the owner as a form of guarantee to ensure the contractor performs its obligations under the contract. Retention is accumulated by withholding 10% of each progress payment until the amount agreed has been reached (ABIC Item 8, Schedule 1 – usually 5% of the contract price). Typically, at PC 2.5% of the retention is released to the contractor, with the remaining 2.5% released at FC.

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6
Q

How can an owner use a bank guarantee provided under the terms of the ABIC contract?

A

If the contractor fails to perform its obligations under the contract, the owner can request and use the bank guarantee monies to pay for another contractor/tradesperson to complete the works (i.e. during DLP - defects liability period). The owner must provide the security provider with a written demand for payment stating the amount of its entitlement.

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7
Q

How can an owner use the money in the retention fund under the terms of the ABIC contract?

A

If the contractor fails to perform its obligations under the contract, the owner can use the retention monies to pay for another contractor/tradesperson to complete the works (i.e. during DLP). The architect must first provide written approval.

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8
Q

When, if at all, is security released and by which party to the ABIC contract?

A

Security is released at Practical Completion (2.5%) and again at Final Certificate (2.5%). The owner releases the security to the contractor.

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9
Q

Does the architect release security under the terms of the ABIC contract and if so to whom?

A

The architect does not release the security. The architect provides approval for retention funds or bank guarantees to be released.

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