Topic
Performance bond
About: Performance bond is a research topic. Over the lifetime, 93 publications have been published within this topic receiving 686 citations.
Papers published on a yearly basis
Papers
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1 Jan 2000
TL;DR: In this article, the authors discuss the role of surety bonds in competitively bid contracts where the owner awards the contract to the lowest responsible bidder and the presence of an impartial third party who extensively investigates and evaluates the qualifications of a contractor prior to contract award.
Abstract: Many industry professionals believe that surety bonds are the foundation for a competitive, properly functioning bidding system. In competitively bid contracts where the owner awards the contract to the lowest responsible bidder, surety bonds help ensure that all bids are in earnest and the selected contractor will perform to the specifications outlined in contract documents. Surety bonds serve as evidence of the contractor's competence and capability. They also guarantee that suppliers of labor and material have some recourse against financial loss that stems from contractors who fail to fulfill their obligations. On projects requiring bonds, suppliers and specialty contractors (subcontractors) will generally remove any allowances for extra funds they may have factored into their quotes to cover the risk of not receiving payment for materials or services. Another significant benefit is the presence of an impartial third party who extensively investigates and evaluates the qualifications of a contractor prior to contract award. Owners should keep in mind that the surety underwriter has access to financial data that contractors rarely release to project owners. Therefore, as a practical matter, surety bonding can be extremely beneficial to the owner. The underwriting evaluation process receives further attention later in this book.
81 citations
Patent•
27 Feb 2002TL;DR: In this paper, a system, method and computer program product are provided for procuring business, and a plurality of suppliers are registered, and contracts are received from customers, such that the customers are informed of the bids so that the bids may be accepted.
Abstract: A system, method and computer program product are provided for procuring business. Initially, a plurality of suppliers are registered. In use, contracts are received from customers. Such contract may take the form of an order for goods or services. The suppliers are subsequently allowed to access the contracts utilizing a network. As such, bids on the contracts may be received from the suppliers utilizing the network. Further, the customers are informed of the bids so that the bids may be accepted. Still yet, the suppliers secure a performance bond relating to the contract for reducing the risk of non-performance by the supplier.
65 citations
TL;DR: In this paper, the authors describe the results of a study to predict contract bond claims based upon contractor financial data, which can assist construction industry professionals by providing them with a quantitative tool to evaluate contractors.
Abstract: This paper describes the results of a study to predict contract bond claims based upon contractor financial data. Financial statements of 87 contractors (36 claim and 51 nonclaim) were obtained from four companies underwriting construction-contract surety bonds. A claim contractor was defined as one that defaulted on a bond, many times requiring the surety to pay a loss. A nonclaim contractor was defined as one that has not defaulted on a surety bond. A predictive model was developed using discrete choice modeling. Variables identified in the model are cost monitoring, underbillings/sales, total current liabilities/sales, retained earnings/sales, and net income before taxes/sales. This model predicts the probability of experiencing a claim in the accounting period following the period in which the financial statement was prepared. Considering each variable, recommendations are presented for reducing the probability of claim. Additionally, questions related to the variables have been developed for consideration by the management of construction companies. The model can assist construction-industry professionals by providing them with a quantitative tool to evaluate contractors.
58 citations
TL;DR: In this paper, the authors identify and classify quantitative and qualitative risk factors impacting construction bond underwriting, to improve the quality of the evaluation analysis, and reduce the highly unstructured environment and the subjectivity of the bond evaluation in underwriting.
Abstract: The qualification process in the construction bond business is very complicated, labor-intensive, and time-consuming The construction bond underwriting processes contain subjective judgments that require human involvement to reach decisions Thus, underwriting evaluations are bound to be very difficult, ambiguous, and have potentially great losses This paper identifies and classifies quantitative and qualitative risk factors impacting construction bond underwriting, to improve the quality of the evaluation analysis, and to reduce the highly unstructured environment and the subjectivity of the bond evaluation in underwriting The methodology provides a systematic information analysis for the heuristic knowledge of the construction surety bonds underwriting process, provides better control over the risk assessment process by providing independent judgments for the major decision factors and an overall judgment for the final contractor’s risk assessment decision, and reduces the time and effort required of the current evaluation process to reach a certain decision and to simplify the complicated nature of this process
29 citations
TL;DR: In this article, the authors assess the effect of performance bonding on the valuation of a build-operate-transfer (BOT) project by extending the classical Black-Scholes-Merton (BSM) call option model.
Abstract: This study assesses the effect of performance bonding on the valuation of a build-operate-transfer (BOT) project by extending the classical Black-Scholes-Merton (BSM) call option model. As common features in BOT contracts, a performance bond is a penalty imposed on concessionaires who exercise contractual rights to terminate participation in a project. In the real-option context, termination rights grant concessionaires the flexibility in managing market uncertainties that can increase the valuation of an infrastructure project, but the penalty impairs this flexibility and reduces valuations. A case study numerically illustrates the BSM model and indicates that performance bonding can destroy the flexibility and project valuations inherent in termination rights even when the penalty is moderate. Balancing performance bonds and termination rights is necessary because both are important in establishing and maintaining long-term contractual relationships in privatized BOT infrastructure projects.
27 citations
Related Topics (5)
Performance Metrics
| Year | Papers |
|---|---|
| 2021 | 1 |
| 2020 | 2 |
| 2019 | 1 |
| 2018 | 3 |
| 2017 | 3 |
| 2016 | 3 |