Surety Bonds for Securities

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Surety Bonds for Securities

Post by riddler on Thu Nov 12, 2009 3:09 pm

Query.

What if the Contractor submits a Surety Bond as a Performance Security, and after the completion of the project he/she decides not to "get it back" from the Procuring Entity?

What if after the completion of the project, the contractor replaces the 10% cash Retention to a Surety Bond and after a year it lapsed? Would the Procuring Entity officially return the "premium bond paper" or shall we wait for a letter request from the contractor?
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Re: Surety Bonds for Securities

Post by sunriser431 on Thu Nov 12, 2009 3:35 pm

ruel wrote:Query.

What if the Contractor submits a Surety Bond as a Performance Security, and after the completion of the project he/she decides not to "get it back" from the Procuring Entity?

What if after the completion of the project, the contractor replaces the 10% cash Retention to a Surety Bond and after a year it lapsed? Would the Procuring Entity officially return the "premium bond paper" or shall we wait for a letter request from the contractor?
Good PM Ruel
Have you tried to read the contents of the sample forms(old) for Surety Bond( Performance security)? I think you can get the idea from there. SF-Good-55 for goods and SF-Infra-71 for reference Hope this might help.
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Re: Surety Bonds for Securities

Post by RDV @ GP3i on Fri Nov 13, 2009 7:59 am

ruel wrote:Query.

What if the Contractor submits a Surety Bond as a Performance Security, and after the completion of the project he/she decides not to "get it back" from the Procuring Entity?


Then the Surety Bond would just lapse and lost its validity. However, the Performance Security should remain valid until the issuance of the Certificate of Acceptance, which is one (1) year after the date of completion.

ruel wrote:What if after the completion of the project, the contractor replaces the 10% cash Retention to a Surety Bond and after a year it lapsed? Would the Procuring Entity officially return the "premium bond paper" or shall we wait for a letter request from the contractor?

Replacement of the "retention Money" by a surety bond callable on demand, or an irrevocable standby L/C, or bank guarantee, should be subject to the condition "that the project is on schedule and satisfactorily undertaken", otherwise the 10% retention shall remain. Likewise, the replacement for the retention money should be valid for a duration to be determined by the procuring entity.

The premium on the bond issuance is a cost on the part of the winning contractor; hence, the procuring entity is not obligated to return the same or reimburse the contractor of such cost.

RDV
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Re: Surety Bonds for Securities

Post by sunriser431 on Fri Nov 13, 2009 8:57 am

ruel wrote: Query.

What if the Contractor submits a Surety Bond as a Performance Security, and after the completion of the project he/she decides not to "get it back" from the Procuring Entity?

This document (surety bond) will form part of the supporting documents to the voucher, moreover this (voucher together with other supporting documents) will be kept by the COA for future post audit.
ruel wrote: What if after the completion of the project, the contractor replaces the 10% cash Retention to a Surety Bond and after a year it lapsed? Would the Procuring Entity officially return the "premium bond paper" or shall we wait for a letter request from the contractor?
Excerpt from the old sample standard form SF-Good-55 for goods and SF-Infra-71
xxxxxx. the Condition of this Obligation is such that, if the Contractor shall promptly and faithfully perform the said Contract (including any amendments thereto) then this obligation shall be null and void; otherwise it shall remain in full force and effect. Whenever the Contractor shall be, and declared by the Employer to be, in default under the Contract, the Employer having performance the Employer’s obligations thereunder, the Surety may promptly remedy the default, or shall promptly xxxxxx
The procuring agency will kept this document (surety bond). whether the winning bidder complied or in default in the performance of the contract. bounce
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