Retention & Performance Bonds

Retention Money is nothing but the money which is being taken under hold from the ongoing invoices (retention is relate to workmanship) from sub contractor / vendor. e.g. a s/c finished a rcc structure - now if anything happens to that structure any failure,destruction relate to s/c due to his bad workmanship, the same amount will be debited from his (s/c) retention money.

And the Performance Bond or Bank Guarantee is the amount which (performance bond relate to performance) is being given by the s/c or vendor before taking the job LOI e.g. if anything stops/hold the job by the main contractor than the same amount will be debited from that performance Bond.

Thanks

Santanu P.
Gurgaon
98992 98682

SB,

In other thoughts:

Retention bond is same purpose as retention money. However, it is in the same form as Performance bond or Bank guarantee that was issued by Contractor to Client.

Retention bond is in Client possession and was done instead of withholding money from Contractor interim payments.

Cheers

Hi,

RETENTION OR RETAINAGE – Usually refers to a percent of contract value retained until work is finished and testing of equipment is satisfactorily completed.

PERFORMANCE BOND – A bond that is executed in connection with a contract and which secures or guarantees the completion, performance and fulfillment of all the work, undertakings, covenants, terms, conditions, and agreements contained in the contract.

Regards,

Arnold

Further to earlier question, I still wonder if these bonds have time constraints on them. Like one services from prject starts to certain date & other from another date to a different date.

Sajid

The release criterea for these bonds are as follows:

Retention Bond - as per contract conditions, for eg, in one of our jobs(FIDIC Contract),the Contractor is required to provide a Retention Bond upon receipt of the Taking Over Certificate for the "whole of the Works" equal to 2.5% (two and a half percent) of the Contract Sum.

Performance Bond - is usually released upon successful completion of the Defects Liability Period.

"Whole of the works" typically denotes that all conditions/services of the Contract have been achieved to the satisfaction of the ’Engineer’