Performance guarantee usually refers to a performance guarantee commitment made by a bank or non bank financial institution as the issuer to the beneficiary (such as the owner and the purchaser) at the request of the applicant (such as the contractor, the supplier, etc.). What is the meaning of performance guarantee in bidding? What is the difference between the performance bond and the bid bond?
Definition of performance guarantee
The performance guarantee refers to a performance guarantee commitment made by the bank financial institution to the owner of the project at the request of the Labor Party and the contractor (applicant). If the Labor Party and the Contractor fail to finish the construction on time, quality and quantity in the future, the bank will pay the owner a sum of money accounting for 5% ~ 10% of the contract amount. The performance guarantee has certain pattern constraints and certain conditions. Performance guarantee is a good substitute for cash guarantee.
The difference between the performance guarantee and the performance guarantee is that the procedures of the performance guarantee are very cumbersome, but there will be a clear period of validity beside the guarantee. After that day, Party B's money will take the initiative to obtain freedom from the bank without Party A's approval or disapproval, but the performance guarantee is very different, when the agreement is reached After that, Party B needs to ask Party A for this fund. Under the current situation in China, it is difficult to get back to the original guarantee fund smoothly. Moreover, party a must have many excuses to push it out, which will increase Party B's investment capital invisibly. Therefore, it is a wise choice for both parties to choose performance guarantee.
The difference between the bid security and the performance security is as follows
1. Different time of submission: the bidding guarantee is submitted when the tenderee delivers the bidding document to the tenderee, and the performance guarantee is the document provided after winning the bid.
2. Different costs: the probability of deduction of the bid security is not high, so the cost of issuing the guarantee is not high. If the performance guarantee fails to complete the project undertaken on time, in quality and in quantity, the bank will pay the owner a sum accounting for 5% - 10% of the contract amount.
3. Different application conditions: the application for bid bond requires the submission of conventional materials required for credit, including business license, legal person code certificate, tax registration certificate, financial statement, company's choice, etc., and the performance bond is not required.
4. Different validity periods: the validity period of the bidding guarantee is generally within six months, which takes effect from the date of issuance, and the performance guarantee is not bound.