The effects of Covid-19 on Performance Bonds
In November the government announced tighter restrictions for England but Construction should continue during this period. On the 4th January the prime minister has once again announced another national lockdown but again construction would continue.
The use of Performance Bonds in JCT and NEC contracts is commonplace but now more than ever Employers are stipulating they are in place on many more contracts than before.
Performance Bonds are commonplace in many tenders and are there to provide security to the beneficiary that the contractor will perform in accordance with the terms of the contract.
How has the market reacted to the pandemic?
Many companies in the industry have taken the approach to further modify wordings, making their stance clear on the effects of Covid-19 and how the policy will react, Performance Bonds are no different and some providers have moved towards the inclusion of Covid-19 restrictions.
Shortage or delays in materials and site closures with furloughed staff will inevitably lead to missed completion deadlines.
Many Surety companies are requiring much more detailed information before providing terms and those contractors with facilities are seeing the capacity being reduced substantially.
Many contractors have found their cash flow impacted by almost a year of restrictions and as such their ability to qualify for a Performance Bond has diminished. Those companies with pre-agreed facilities have found that their limits have been lowered or revoked leaving them unable to provide a Bond for future tenders.
SB&G have access to a vast array of providers so are able to still source highly competitive terms and bond multiple contracts using different markets to ensure works can still proceed.