Performance Security The Performance Security provides the Employer with a readily accessible cash reserve that can

be called on in the event that the Contractor fails to fulfil his obligations under the Contract. An institution such as a bank or insurance company guarantees availability of the money. Therefore it is independent of the Contractors cash reserves. The most common reason for calling in a Performance Security is; to have a safeguard against insolvency of the contracting company. For this reason a Performance Security is generally more important in longer-term contracts. Although the Contractors financial stability is assessed as part of the bid evaluation it can, however, deteriorate over a period of time. Normally, Performance Security will be required in the amount of 5% of the Contract Price (depending on the level of risk and type of security offered). An unconditional bank guarantee or a performance bond is normally required although there are several other options available. The bidding documents must state that the Performance Security must be issued by a reputed bank or other financial institution acceptable to the Employer.