What is a Construction Performance Bond

What is a Construction Performance Bond?

Nationwide Sureties are the UK’s trusted specialists in construction guarantees, helping clients understand exactly what a construction performance bond is and how it protects your project. We secure competitive quotes from leading providers to ensure you get the best terms and peace of mind.

• Competitive Premiums
• Access to the Full Surety Market
• Quick and Simple Application Process
• Expert Knowledge of Construction Performance Bonds
• ABI, On-Demand, Adjunction, or Hybrid Wordings Considered

What is a Construction Performance Bond?

So, what is a construction performance bond? Simply put, it’s a financial guarantee—typically 10% of the contract value—that protects the employer (the project owner) if the contractor fails to meet their obligations. For example, on a £5 million project, a £500,000 bond ensures that if the contractor defaults, the employer can recover costs to complete the project. Construction performance bonds are essential for managing risk in building and infrastructure contracts.

How Does a Construction Performance Bond Work?

Understanding what a construction performance bond does is key for contractors and project owners. It creates a tripartite agreement between the contractor (principal), the employer (beneficiary), and the surety company (guarantor). If the contractor defaults—due to insolvency, poor performance, or other reasons—the project owner can claim against the bond. The surety will investigate, and if valid, pay damages up to the bond limit, ensuring the project can continue without financial loss.

What We Require to Arrange Your Construction Performance Bond:

To secure your bond and fully answer what is a construction performance bond in practice, we’ll need:

• Contract details, including bond amount and period
• A completed application form
• A copy of the bond wording (if unspecified, we can suggest standard wordings)
• Your latest published accounts (including group accounts if applicable)
• Your most recent management accounts (up to the latest quarter)

Once received, our underwriters will review your what is a construction performance bond application, assess your financial position, and provide competitive terms. After acceptance and paperwork completion, your bond will be issued—ready to protect your project and meet employer requirements.

Quick FAQ: What is a Construction Performance Bond?

• Who needs a construction performance bond? Contractors on large construction projects where the client requires financial security against non-performance.
• When is a performance bond released? Typically at project completion or after the defects liability period, once all obligations are fulfilled.
• Does it cover poor workmanship? It covers failure to perform contractual obligations, which can include poor workmanship if defined in the contract.
• Is a construction performance bond mandatory? It depends on the contract, but many public and private projects require them as standard practice.