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Performance Security

Post by riddler on Mon Feb 25, 2013 5:52 pm

Excerpt from Sec. 7 of the PBDs for Infra.

"xxx
7.3. The performance security shall remain valid until issuance by the Procuring Entity of the Certificate of Final Acceptance.

7.4. The performance security may be released by the Procuring Entity and returned to the Contractor after the issuance of the Certificate of Final Acceptance..xxxx"

Do we need to require a Performance Security after a Certificate of Completion is given to the Contractor prior to the issuance of a Certificate of Final Acceptance? Very Happy

The Issuance of the Certificate of Final Acceptance is to be given 1 year after the issuance of the Certificate of Completion. What is there to perform on the part of the contractor after it completed the project if we require a Performance Security after the issuance of the Certificate of Completion following Section 7.4 before we can issue the Certificate of Final Acceptance? Very Happy


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Re: Performance Security

Post by engrjhez® on Mon Feb 25, 2013 7:27 pm

riddler wrote:
Excerpt from Sec. 7 of the PBDs for Infra.

"xxx
7.3. The performance security shall remain valid until issuance by the Procuring Entity of the Certificate of Final Acceptance.

7.4. The performance security may be released by the Procuring Entity and returned to the Contractor after the issuance of the Certificate of Final Acceptance..xxxx"

Do we need to require a Performance Security after a Certificate of Completion is given to the Contractor prior to the issuance of a Certificate of Final Acceptance? Very Happy

The Issuance of the Certificate of Final Acceptance is to be given 1 year after the issuance of the Certificate of Completion. What is there to perform on the part of the contractor after it completed the project if we require a Performance Security after the issuance of the Certificate of Completion following Section 7.4 before we can issue the Certificate of Final Acceptance? Very Happy



Please note that the wordings connote continuation, not that another one is to be issued. The Performance security posted before entering into contract shall continue to be valid covering the defects liability period (1-year after completion until issuance of Final Acceptance). It is to ensure that during said period contractor shall make the necessary correction of latent defects that may be observed from the structure. After which, warranty security will replace the performance security for 1 more year. Smile
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Re: Performance Security

Post by riddler on Wed Feb 27, 2013 2:46 pm

engrjhez® wrote:
riddler wrote:
Excerpt from Sec. 7 of the PBDs for Infra.

"xxx
7.3. The performance security shall remain valid until issuance by the Procuring Entity of the Certificate of Final Acceptance.

7.4. The performance security may be released by the Procuring Entity and returned to the Contractor after the issuance of the Certificate of Final Acceptance..xxxx"

Do we need to require a Performance Security after a Certificate of Completion is given to the Contractor prior to the issuance of a Certificate of Final Acceptance? Very Happy

The Issuance of the Certificate of Final Acceptance is to be given 1 year after the issuance of the Certificate of Completion. What is there to perform on the part of the contractor after it completed the project if we require a Performance Security after the issuance of the Certificate of Completion following Section 7.4 before we can issue the Certificate of Final Acceptance? Very Happy



Please note that the wordings connote continuation, not that another one is to be issued. The Performance security posted before entering into contract shall continue to be valid covering the defects liability period (1-year after completion until issuance of Final Acceptance). It is to ensure that during said period contractor shall make the necessary correction of latent defects that may be observed from the structure. After which, warranty security will replace the performance security for 1 more year. Smile



Example:

Contractor A duration of the project is good for 12 months (Jan-Dec, 2013), and posted a Performance Security valid for one (1) year as reflected in the Bond. After contractor A completed the project up to December 2013, a Certificate of Completion is issued by the PE. Since its Performance Security has already lapsed/expired, will the Procuring Entity require another Performance Security from
Jan-Dec, 2014 before the PE issues a Certificate of Final Acceptance following the abovementioned Section of the PBDs?ü. Very Happy
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Re: Performance Security

Post by RDV @ GP3i on Thu Feb 28, 2013 12:06 pm

riddler wrote:
engrjhez® wrote:
riddler wrote:
Excerpt from Sec. 7 of the PBDs for Infra.

"xxx
7.3. The performance security shall remain valid until issuance by the Procuring Entity of the Certificate of Final Acceptance.

7.4. The performance security may be released by the Procuring Entity and returned to the Contractor after the issuance of the Certificate of Final Acceptance..xxxx"

Do we need to require a Performance Security after a Certificate of Completion is given to the Contractor prior to the issuance of a Certificate of Final Acceptance? Very Happy

The Issuance of the Certificate of Final Acceptance is to be given 1 year after the issuance of the Certificate of Completion. What is there to perform on the part of the contractor after it completed the project if we require a Performance Security after the issuance of the Certificate of Completion following Section 7.4 before we can issue the Certificate of Final Acceptance? Very Happy



Please note that the wordings connote continuation, not that another one is to be issued. The Performance security posted before entering into contract shall continue to be valid covering the defects liability period (1-year after completion until issuance of Final Acceptance). It is to ensure that during said period contractor shall make the necessary correction of latent defects that may be observed from the structure. After which, warranty security will replace the performance security for 1 more year. Smile



Example:

Contractor A duration of the project is good for 12 months (Jan-Dec, 2013), and posted a Performance Security valid for one (1) year as reflected in the Bond. After contractor A completed the project up to December 2013, a Certificate of Completion is issued by the PE. Since its Performance Security has already lapsed/expired, will the Procuring Entity require another Performance Security from
Jan-Dec, 2014 before the PE issues a Certificate of Final Acceptance following the abovementioned Section of the PBDs?ü. Very Happy

The Performance Security that was required to be posted must have been valid not just for one (1) year but for the period from contract signing up to issuance of Certificate of Acceptance, which includes the 1-year defects liability period from completion date.

However, since the PS posted was valid only for one year, then there is a need to require the contractor to post another PS to cover the 1-year defects liability period.

If the defects liability period has also already lapse without being covered by a PS, because the procuring entity neglected it, I don't see any purpose for requiring the contractor to post it only as a condition for issuance of Certificate of Acceptance. It should not mean, however, that the responsible officials of the procuring entity should not be held accountable for its failure to require the necessary PS or see to it that the PS posted should have been valid for a period covering the period of construction plus the 1 year period after completion.
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Re: Performance Security

Post by riddler on Fri Mar 01, 2013 3:50 pm

RDV @ GP3i wrote:
riddler wrote:
engrjhez® wrote:
riddler wrote:
Excerpt from Sec. 7 of the PBDs for Infra.

"xxx
7.3. The performance security shall remain valid until issuance by the Procuring Entity of the Certificate of Final Acceptance.

7.4. The performance security may be released by the Procuring Entity and returned to the Contractor after the issuance of the Certificate of Final Acceptance..xxxx"

Do we need to require a Performance Security after a Certificate of Completion is given to the Contractor prior to the issuance of a Certificate of Final Acceptance? Very Happy

The Issuance of the Certificate of Final Acceptance is to be given 1 year after the issuance of the Certificate of Completion. What is there to perform on the part of the contractor after it completed the project if we require a Performance Security after the issuance of the Certificate of Completion following Section 7.4 before we can issue the Certificate of Final Acceptance? Very Happy



Please note that the wordings connote continuation, not that another one is to be issued. The Performance security posted before entering into contract shall continue to be valid covering the defects liability period (1-year after completion until issuance of Final Acceptance). It is to ensure that during said period contractor shall make the necessary correction of latent defects that may be observed from the structure. After which, warranty security will replace the performance security for 1 more year. Smile



Example:

Contractor A duration of the project is good for 12 months (Jan-Dec, 2013), and posted a Performance Security valid for one (1) year as reflected in the Bond. After contractor A completed the project up to December 2013, a Certificate of Completion is issued by the PE. Since its Performance Security has already lapsed/expired, will the Procuring Entity require another Performance Security from
Jan-Dec, 2014 before the PE issues a Certificate of Final Acceptance following the abovementioned Section of the PBDs?ü. Very Happy

The Performance Security that was required to be posted must have been valid not just for one (1) year but for the period from contract signing up to issuance of Certificate of Acceptance, which includes the 1-year defects liability period from completion date.

However, since the PS posted was valid only for one year, then there is a need to require the contractor to post another PS to cover the 1-year defects liability period.

If the defects liability period has also already lapse without being covered by a PS, because the procuring entity neglected it, I don't see any purpose for requiring the contractor to post it only as a condition for issuance of Certificate of Acceptance. It should not mean, however, that the responsible officials of the procuring entity should not be held accountable for its failure to require the necessary PS or see to it that the PS posted should have been valid for a period covering the period of construction plus the 1 year period after completion.

Very Happy Very Happy okay.. what i understand of the defects liability period pertains to the 10% Retention Money (Section 42 of the PBD) which is also valid for one (1) year before the issuance of a Certificate of Final Acceptance. If we require the Contractor to post/renew another Performance Security (what is there to perform?) on top of a Retention Money/Bond/Guaranty after the issuance of a Certificate of Completion, would it not result to a redundant or double posting of Securities (Performance and Retention) for the project? Very Happy Very Happy

:-) how do we deal with Contractors who secures a Certificate of Final Acceptance 5 years after the issuance of a Certificate of Completion and after the lapse of the one(1) year Defects Liability Period? Shall we require them to post a Performance Security year after year until such time the Contractor request for a CFA? :-) Very Happy Very Happy
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Re: Performance Security

Post by RDV @ GP3i on Sat Mar 02, 2013 8:26 am

a


Last edited by RDV @ GP3i on Sat Mar 02, 2013 8:38 am; edited 2 times in total
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Re: Performance Security

Post by RDV @ GP3i on Sat Mar 02, 2013 8:36 am

riddler wrote:
RDV @ GP3i wrote:
riddler wrote:
engrjhez® wrote:
riddler wrote:
Excerpt from Sec. 7 of the PBDs for Infra.

"xxx
7.3. The performance security shall remain valid until issuance by the Procuring Entity of the Certificate of Final Acceptance.

7.4. The performance security may be released by the Procuring Entity and returned to the Contractor after the issuance of the Certificate of Final Acceptance..xxxx"

Do we need to require a Performance Security after a Certificate of Completion is given to the Contractor prior to the issuance of a Certificate of Final Acceptance? Very Happy

The Issuance of the Certificate of Final Acceptance is to be given 1 year after the issuance of the Certificate of Completion. What is there to perform on the part of the contractor after it completed the project if we require a Performance Security after the issuance of the Certificate of Completion following Section 7.4 before we can issue the Certificate of Final Acceptance? Very Happy



Please note that the wordings connote continuation, not that another one is to be issued. The Performance security posted before entering into contract shall continue to be valid covering the defects liability period (1-year after completion until issuance of Final Acceptance). It is to ensure that during said period contractor shall make the necessary correction of latent defects that may be observed from the structure. After which, warranty security will replace the performance security for 1 more year. Smile



Example:

Contractor A duration of the project is good for 12 months (Jan-Dec, 2013), and posted a Performance Security valid for one (1) year as reflected in the Bond. After contractor A completed the project up to December 2013, a Certificate of Completion is issued by the PE. Since its Performance Security has already lapsed/expired, will the Procuring Entity require another Performance Security from
Jan-Dec, 2014 before the PE issues a Certificate of Final Acceptance following the abovementioned Section of the PBDs?ü. Very Happy

The Performance Security that was required to be posted must have been valid not just for one (1) year but for the period from contract signing up to issuance of Certificate of Acceptance, which includes the 1-year defects liability period from completion date.

However, since the PS posted was valid only for one year, then there is a need to require the contractor to post another PS to cover the 1-year defects liability period.

If the defects liability period has also already lapse without being covered by a PS, because the procuring entity neglected it, I don't see any purpose for requiring the contractor to post it only as a condition for issuance of Certificate of Acceptance. It should not mean, however, that the responsible officials of the procuring entity should not be held accountable for its failure to require the necessary PS or see to it that the PS posted should have been valid for a period covering the period of construction plus the 1 year period after completion.

Very Happy Very Happy okay.. what i understand of the defects liability period pertains to the 10% Retention Money (Section 42 of the PBD) which is also valid for one (1) year before the issuance of a Certificate of Final Acceptance. If we require the Contractor to post/renew another Performance Security (what is there to perform?) on top of a Retention Money/Bond/Guaranty after the issuance of a Certificate of Completion, would it not result to a redundant or double posting of Securities (Performance and Retention) for the project? Very Happy Very Happy

The purpose of Performance Security is to "guarantee the faithful performance by the winning bidder of its obligations under the contract..." (Sec. 39.1, IRR). It is a requirement that the PS be valid until issuance by the procuring entity of the final Certificate of Acceptance (Sec. 39.4).

In the GCC of the PBD for Infra, the Defects Liability Period (DLP) is one (1) year from project completion up to final acceptance by the procuring entity. During that period, as the term implies, the contractor is liable for any defects on account of the use of inferior quality materials.

The obligations, therefore, of the contractor which are guaranteed by the PS, are to complete the project in accordance with the procuring entity's requirement and on time, as well as to correct any defects discovered within one year after completion. What the contractor needs to perform after completion is to correct any defects identified by the procuring entity's representative after due notice is given to the contractor. It is the obligation of the contractor to correct the defects before the end of the defects liability period.

Hopefully, that answers your question on what is there to perform after the project is already completed.

There would be no redundancy with the Retention Money as it is a requirement separate altogether from the PS. (Please read Annex E of the IRR)[/quote]

riddler wrote::-) how do we deal with Contractors who secures a Certificate of Final Acceptance 5 years after the issuance of a Certificate of Completion and after the lapse of the one(1) year Defects Liability Period? Shall we require them to post a Performance Security year after year until such time the Contractor request for a CFA? :-) Very Happy Very Happy
NO, definitely you do not require the contractor to post PS if he secures or got his CFA 5 years after completion. If he did not secure the CFA then it is his lookout and it is no longer the fault of the procuring entity. If, however, the reason why he was unable to secure the CFA is because he failed to correct the discovered defects, posting of a belated PS is not the correct solution. The correct solution is for the procuring entity to go after the retention money or whatever collectibles the contractor may have with the procuring entity, without prejudice to filing appropriate legal remedies or administrative sanctions that could still be imposed on him, like suspension or blacklisting.

I hope I have finally cleared any issues still lingering in your mind, riddler. Very Happy
[/quote]
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Re: Performance Security

Post by riddler on Sun Mar 03, 2013 10:23 am

thanks jhez & RDV. great discussion. Very Happy

if I get it right RDV, the 10% Retention Money for the 1 (one) year DLP shall be covered also by a 10% PS if the older PS(after the issuance of CIC) for the whole contract amount have already expired/lapsed. Very Happy
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Re: Performance Security

Post by RDV @ GP3i on Mon Mar 04, 2013 7:16 am

riddler wrote:thanks jhez & RDV. great discussion. Very Happy

if I get it right RDV, the 10% Retention Money for the 1 (one) year DLP shall be covered also by a 10% PS if the older PS(after the issuance of CIC) for the whole contract amount have already expired/lapsed. Very Happy

The Retention Money is not (collected) for the one year defects liability period. It is collected when the contractor makes progress payments during construction period. Hence, it is collected before the project is completed. It is to be returned, however, after the end of the DLP.

I do not quite understand your statement that the 10% Retention Money shall be covered also by a 10% PS, if the original PS has already lapsed (since the procuring entity failed to require that it be valid until the issuance of the Certificate of Acceptance). If that is what you mean, it is not correct. The PS does not cover the RM.
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Re: Performance Security

Post by riddler on Mon Mar 04, 2013 4:26 pm

RDV @ GP3i wrote:
riddler wrote:thanks jhez & RDV. great discussion. Very Happy

if I get it right RDV, the 10% Retention Money for the 1 (one) year DLP shall be covered also by a 10% PS if the older PS(after the issuance of CIC) for the whole contract amount have already expired/lapsed. Very Happy

The Retention Money is not (collected) for the one year defects liability period. It is collected when the contractor makes progress payments during construction period. Hence, it is collected before the project is completed. It is to be returned, however, after the end of the DLP.

I do not quite understand your statement that the 10% Retention Money shall be covered also by a 10% PS, if the original PS has already lapsed (since the procuring entity failed to require that it be valid until the issuance of the Certificate of Acceptance). If that is what you mean, it is not correct. The PS does not cover the RM.

Very Happy what i meant, if during the DLP defects were found and needs to be repaired using the 10% Retention Money or the Contractor's finances, will the Contractor post another PS for the repair of that matter after the issuance of the CIC and the original PS have already expired/lapsed? Very Happy
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Re: Performance Security

Post by regina avelino on Mon Mar 04, 2013 5:37 pm

what does CIC stand for?

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Re: Performance Security

Post by regina avelino on Mon Mar 04, 2013 6:03 pm

sorry for barging in.

the contractor is required to post another PS if the first PS has already lapsed on the same date when the project was completed. the second PS shall cover the defect liability period of 1 year after the completion date or the supposed final acceptance.

both the retention money and the PS if both were in cash shall be returned to the contractor 1 year after the completion date or the lapse of the DLP and the contractor has repaired the detected defects. if one or both PS and RM are in the form of a bond then just let it expire one year after completion.

if the contractor refuses to repair the defects during the DLP, government agency shall use the retention money to make good of the defect and release the excess retention money (if the retention money is in cash) together with the PS (or just expire) one year after completion.

if the contractor refuses to post another PS to cover the DLP which is one year after completion, the government agency must and should file a case to court to for failure to comply with the requirements of the law on PS.

if the contractors does not request for CFA, then it's his fault, no need to require posting of PS year after year until five years when they request for CFA, what is important is that the contractor must post warranty security after the DLP. Warranty security must be valid within 1 year after the DLP.


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