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When you let a construction contract as an employer you are taking a certain element of risk that the contractor will not complete the job to your requirements or to your satisfaction, or to the requirements and satisfaction of a local authority. This might be down to poor performance, or perhaps because the contractor goes out of business, but whatever the reason, there is a financial burden which can fall back on to you.
Companies procuring construction services often look for written guarantees and can demand that their primary contractors put up security when awarding them a contract so that the potential financial risk is offset to a greater or lesser extent. Similarly, local authorities and bodies responsible for roads, sewers and similar public works may require bonds to ensure that they will inherit works which are complete and to the correct specification.
The security can be provided by the contractor’s bank, but the disadvantage to the contractor in such an arrangement is that it ties up a significant chunk of their credit line, and by that very fact it can endanger liquidity and solvency, thus increasing the risk of financial failure.
The more commonly sought alternative is a bond issued by an insurance company, and assuming that the insurer concerned is reputable and financially sound this is preferable for most employers.
Bonds are a specialised area of insurance. Weald will work with you to give you a clear understanding of the requirements on you, and the potential solutions available in the bond market.