The performance bond ratio is generally 5%-25%, and 10% is generally paid in China. After signing the contract, the tenderer and the successful bidder shall become the contractor and the contractor. The contractor must provide a performance guarantee issued by a bank to the accepting contractor, with the amount generally being 10%-15% of the contract amount, to ensure that the contractor performs according to the terms of the contract. Otherwise, the bank will be responsible for compensating a certain amount, up to a maximum of the total amount of the performance guarantee.

Performance bond is one of the forms of performance guarantee. The performance guarantee is provided by the project contractor to prevent the contractor from violating the contract provisions or breach of contract during the execution of the contract, and to compensate for the economic losses caused to the contractor. There are three forms: performance bond, performance bank guarantee and performance guarantee. A performance bond is a financial guarantee between the buyer and seller to ensure performance of the contract. Traders in the futures market must deposit a certain amount of performance bond when conducting transactions. The amount of the margin is set by the exchange that provides contract trading. The amount is usually 5-15% of the total contract value. Of course, the broker or entrusted broker Additional margin will also be set by itself, and the amount of this additional margin will not be lower than the level specified by the exchange. The performance bond emphasizes the guarantee of the interests of the tendering party or the interests of investors. This guarantee can be borne by either the winning contractor or a third party, but it must be approved by the tendering party to be valid, resulting in a third party bearing joint and several liability. , and therefore substitutable. The performance bond is independent and must be collected, stored, executed and returned by an institution recognized by both parties.

Do service projects require a performance bond?

(1) Commercial contract

(Commercial contract) Contract performance payment refers to a monetary guarantee provided for the performance of the contract. It will be refunded only when the contract between the two parties expires or is terminated in accordance with the law. It is not a legal guarantee for debts, and its nature and effectiveness lack legal basis.

(2) Futures field

(Futures field) The deposit deposited in the trading account by the buyers and sellers of futures contracts or option sellers to ensure the performance of the contract. Commodity futures margin is not a payment for a stock, nor is it an advance deposit for trading the commodity, but a deposit of good standing.

(3) Regulations on the return of performance bonds

A. Comprehensively clean up all types of bonds. As for the deposits that construction enterprises need to pay during project construction, except for the bidding deposit, performance deposit, project quality deposit, and migrant worker wage deposit established in accordance with the law and regulations, all other deposits will be cancelled. All cancellation deposits will be stopped from the date of issuance of this notice.

B. Change the deposit payment method. A bank guarantee system will be implemented for the retained bidding deposits, performance bonds, project quality deposits, and migrant worker wage deposits, and construction enterprises can pay by bank guarantees.

C. Return the deposit on time. For canceled deposits, all localities must promptly formulate specific and feasible measures to return them to relevant enterprises before the end of 2016; for retained deposits, relevant regulations must be strictly implemented to ensure that they are returned on time. If the security deposit is not returned as stipulated in the regulations or contract, the party receiving the security deposit shall pay liquidated damages for overdue return to the construction enterprise.

D. Strictly manage project quality deposits. The upper limit of the reserved proportion of the project quality deposit shall not be higher than 5% of the total project price settlement. If a performance bond has been paid before the completion of the project, the construction unit shall not reserve a project quality bond at the same time.

E. Implement differentiated deposit methods for wage deposits for migrant workers. For enterprises that have not incurred wage arrears within a certain period, reduction and exemption measures will be implemented; for enterprises that have wage arrears, the deposit ratio will be appropriately increased.

F. Standardize the margin management system. Regarding the retained deposits, relevant laws and regulations must be revised as soon as possible, and the deposit management system and specific measures must be improved. Regarding the cancellation of deposits, it is necessary to promptly revise or abolish the system regulations that are inconsistent with the requirements of the clean-up standard work. While cleaning up and standardizing deposits, it is necessary to gradually establish a new mechanism to supervise and restrict construction companies by incorporating them into the credit system.

G. It is strictly prohibited to establish new deposit projects. Without the approval of the State Council, all regions and departments are not allowed to establish new deposit projects in any form in the field of engineering construction. It is necessary to comprehensively promote the disclosure of deposit information in the field of engineering construction, establish a reporting and investigation mechanism, regularly announce the results of investigations, and expose typical cases of illegal collection of deposits. All regions and departments must strengthen organizational leadership, formulate specific plans, strengthen supervision and inspection, actively and steadily advance, and effectively implement the work of cleaning up and standardizing deposits in the field of engineering construction. Each region must clarify the division of responsibilities and time limit requirements, and submit the implementation status to the Ministry of Housing and Urban-Rural Development and the Ministry of Finance before the end of January 2017. The Ministry of Housing and Urban-Rural Development and the Ministry of Finance must closely track the progress and strengthen overall coordination with relevant departments. Those who fail to clean up and standardize as required, conceal the collection of deposits, etc. must be held seriously accountable to ensure that the cleanup and standardization work is effective and will be implemented in a timely manner. Report the situation to the State Council.

3. The role of the performance bond

The binding subject of the performance bond is very clear, which is the winning bidder of the project. The main function of the performance bond is to ensure the full performance of the contract and to ensure the quality and quality specified in the contract. Standard and duration clauses to fulfill the contract.

In order to control discounts and water issues during the execution of the contract, the successful bidder is required to pay a certain amount of performance bond before the contract is executed. The contract will be inspected and accepted at any time. Any problems found will be rectified within a time limit. Otherwise, the performance bond will be confiscated or partially deducted. In specific operations, delay compensation fees can also be deducted from the payment payable or the performance bond. The author believes that the establishment of a performance bond system plays an important role in promoting the successful bidder to perform the contract, preventing the successful bidder from breaching the contract, urging the successful bidder to perform its contractual obligations, and punishing defaulters.

Legal basis:

Article 46 of the "Tendering and Bidding Law of the People's Republic of China"

Except for Article 37 of the Tendering and Bidding Law Except for the special bidding projects stipulated in Paragraph 3, for projects that must be bid according to law, the expert members of the bid evaluation committee shall be randomly selected from the list of experts in relevant professions in the bid evaluation expert database. No unit or individual may expressly or implicitly designate or covertly designate expert members to participate in the bid evaluation committee.

The bidder of a project that requires bidding according to law shall not change the members of the bid evaluation committee determined by law except for reasons stipulated in the Bidding and Bidding Law and these Regulations. The replacement of expert members of the bid evaluation committee shall be carried out in accordance with the provisions of the preceding paragraph.

If a member of the bid evaluation committee has an interest in the bidder, he shall voluntarily recuse himself.

The relevant administrative supervision departments shall supervise the determination of members of the bid evaluation committee, the selection of bid evaluation experts and bid evaluation activities in accordance with the prescribed division of responsibilities. Staff members of the administrative supervision department shall not serve as members of the bid evaluation committee responsible for supervising projects within their department.