THE MAIN TYPES OF SURETY BONDS
Participation in a Tender
This refers to tenders in the public or private sector for the supply of goods, construction, or undertaking of projects, which is submitted to the tendering authority. The amount of the participation Surety Bond is typically a percentage, usually 2%, of the total project/budget amount.
Performance
This guarantees the fulfillment of agreements and generally the terms of a contract. This surety bond typically replaces and nullifies the participation surety bond, which is no longer valid. The amount is usually a percentage ranging from 5% to 10% of the undertaken work value.
Advance Payment
In most cases, a monetary advance is specified in the contract for the execution of a project or the supply of goods after the tender award. To collect this advance, a Surety Bond from a financial institution is provided. The amount of the advance is typically withheld until the completion of the order, especially in the case of public procurement, or upon partial deliveries. It can also be withheld gradually according to the contract with each certification, especially for construction projects.
Retention
This type of Surety Bond is commonly used in all public works. When a company takes on a project and submits the Good Performance Surety Bond, work is carried out periodically, and the value of the completed work is assessed during specific periods. This assessment is checked by the supervising engineer of the relevant authority or organization (for which the project is being carried out) and payment is approved by the competent authority. The payment is called "project certification."
From each certification, typically 10% is withheld and will be paid to the contractor when the project is completed on time, in accordance with the specifications, and the terms of the contract, after a predetermined period (usually one or two years) from its delivery, to ensure its proper functioning.
To recover these withheld amounts early, the contractor provides the service or organization with a Surety Bond from a financial institution, replacing the cash. This ensures that the organization is covered by the surety bond, which is complementary to the Performance Surety Bond, and the contractor receives the full amount of the certification.
From each certification, typically 10% is withheld and will be paid to the contractor when the project is completed on time, in accordance with the specifications, and the terms of the contract, after a predetermined period (usually one or two years) from its delivery, to ensure its proper functioning.
To recover these withheld amounts early, the contractor provides the service or organization with a Surety Bond from a financial institution, replacing the cash. This ensures that the organization is covered by the surety bond, which is complementary to the Performance Surety Bond, and the contractor receives the full amount of the certification.
Operation / Maintenance
This Surety Bond ensures the beneficiary that the contractor executing a project is capable of carrying out the work and maintenance obligations arising from the relevant contract, protecting him from financial damage, if the contractor fails to meet the agreed terms.
Payment
These Surety Bonds guarantee the settlement of a debt or the value of purchased goods, etc. They are categorized into value-based and installment-based bonds.
Renewable Energy (RE) and Energy Storage
According to European Parliament Directive 2009/28/EC, energy produced from renewable sources (RE) includes energy from non-fossil sources such as wind, solar, geothermal, hydropower, ocean energy, biomass, landfill gas, sewage treatment gas, and biogas.
Surety bonds that fall in this category primarily concern the licensing process for related production stations, and their common forms include the Producer's Certificate, Connection Terms, Priority, etc.
Surety bonds that fall in this category primarily concern the licensing process for related production stations, and their common forms include the Producer's Certificate, Connection Terms, Priority, etc.
Tax and Customs Duties
These Surety Bonds secure the Tax and Customs Authorities for covering the obligations of the Importer (the insured party), such as duties and charges associated with the import/export of goods and fuel trade.