RICS draft guidance note - Subcontracting (1st edition)

Appendix 3: Performance security: key issues regarding enabling provisions

Issue

PCG

Performance bond

The type of the performance security

  1. The form should be included in the subcontract.
  2. Where JCT DBSub 2016 applies, the form can be in the numbered documents.
  3. Where NEC4 ECS applies, the form should be in the subcontract scope.
  1. The same as the PCG.

The date on which the performance security should be provided by the subcontractor

  1. On the date the subcontract is entered into, or a date no more than four weeks afterwards
  2. NEC4 ECS (secondary Option X4) adopts this approach
  1. The same as the PCG.
  2. NEC4 ECS (secondary Option X13) adopts this approach.

The main contractor's rights and remedies if the performance security is not provided by the subcontractor

  • The main contractor should be entitled to:
  • withhold payment until the PCG is provided, and
  • terminate the subcontract.
  • This is without prejudice to the main contractor's other rights and remedies.

  1. The same as the PCG.

The identity of the guarantor/surety (name, company number, etc.)

  1. This should be stated in the subcontract.
  1. This should be stated in the subcontract; if not, it should be subject to the main contractor's approval or acceptance.
  2. NEC4 ECS (secondary Option X13) states that the surety must be a bank or insurer that the main contractor has accepted, and gives a reason for not accepting the bank or insurer: its commercial position is not strong enough to carry the bond.

The procedure to be adopted if the performance security expires before completion of the subcontract works

  • In most cases, this is not required because the PCG will expire after completion (usually 12 years afterwards).
  • In some cases, the bond will contain a longstop date, the latest date on which the bond expires.
  • If the longstop date is reached before the subcontract works are completed, the subcontractor should be required to extend the expiry of the bond, or replace the bond with a new bond that has a later expiry date.