Why Housing Associations Need Performance Bonds

Housing Associations require Performance Bonds for a number of different reasons when engaging Contractors for construction, repair or maintenance works. This article will discuss all the reasons that Housing Associations need and can benefit from Performance Bonds.

The Benefits of Performance Bonds

Performance Bonds offer a variety of benefits to both Housing Associations and Contractors, with some of the main benefits including: they are designed with both parties in mind. The main benefits that Performance Bonds offer Housing Associations include:

•  Risk Mitigation – Performance Bonds help ensure that contractors fulfil their obligations as per the contract. The Bond can be used as a safety net to cover the cost of appointing and completing the works via another Contractor.
• Financial Protection – Housing Associations often manage large schemes with significant budgets. Performance Bonds protect the Housing Association’s funds in the event the contractor defaults on their obligations.
• Compliance and Governance – Housing Associations are usually subject to regulatory and public accountability, and therefore Performance Bonds demonstrate a level of due diligence.
• Project Continuity – If a contractor becomes insolvent or abandons the project, thereby breaching the contract, the Performance Bond can be utilised to compensate the Housing Association for the costs associated with major delays and the appointing and screening of a new Contractor.
•  Contractor Accountability – Knowing that a Performance Bond is in place by the Contractor serves as a deterrent and reduces the likelihood of non-performance.
• Public Interest: In the case of social housing, Performance Bonds help protect the public purse by ensuring that taxpayer money invested in projects is used effectively.
• Alternative to Bank Bonds: Performance bonds can offer a real alternative to traditional bank bonds, providing a convenient and cost-effective way to secure project delivery.

What Happens if a Contractor Can’t Complete a Project?

If a contractor cannot complete a project, for example, if they become insolvent, then a Performance Bond protects the Housing Association so that they can still get the construction work done. In this case, the employer can hire a replacement contractor to complete the project without any extra financial outlay from the Housing Association.

Here at CG Bonds, we work with and liaise with all parties involved to provide our expertise to ensure the swift implementation of Performance Bonds on social housing schemes.

Can An Employer Insist on A Performance Bond?

Employers commonly require appointed contractors to obtain performance bonds as a safeguard against losses arising from contractor default or insolvency. Given the increasingly challenging economic climate and the rising number of contractor insolvencies, the use of performance bonds is becoming more prevalent across the UK construction industry.

When May Performance Bonds Be Called Upon?

There are a number of circumstances where a Housing Association may need to call upon a Performance Bond to ensure the project is completed. These situations include:

• If the contractor becomes insolvent. 
• If the contractor fails to complete the work to an acceptable standard. 
• If the contractor abandons the project. 
• If the contractor breaches the contract.

If this happens, then the Housing Association or creditor can call on the Performance Bond to help compensate the employer for any losses that have occurred as a result of the above circumstances. 

CG Bonds Surety specialise in procuring Performance Bonds and Warranty Bonds through our technical knowledge and expertise. Due to our deep-rooted understanding, CG Bonds can navigate the intricacies of these bonds, meaning bespoke solutions can be tailored to each client’s unique needs. Fill in our fast and easy application form today.

Performance Bonds and More From CG Bonds

To obtain a Performance Bond from CG Bonds Surety, our dedicated client account management team is here to support you every step of the way. To kick-start the application process, we will ask for the following essential information:

• Completed and Signed Application Form
• Most Recent Audited Financial Accounts
• Copy of Performance Bonds Wording (if available)

Contact CG Bonds to enquire about Performance Bonds today!

The information provided in this blog is not intended to constitute legal advice or any other advice of a professional nature. The recipient of this information contained in this blog should always consult legal or professional advice.