It’s hoped that any construction project you sign to complete will go without a hitch. Even if this is the case throughout the planning and building process, there could be a problem upon completion, even if it’s not obvious at first.

At this point, your business could still be responsible for these issues, and therefore liable to any costs that need covering.

A performance bond policy gives a financial guarantee that you’ll be able to cover the cost of any contract defaults, such as a problem with the building. In the UK, they are usually 10% of the contract price.

The service sector, engineering and commercial construction companies are those most likely to benefit from a performance bond, while it is local authorities, government bodies and main commercial contractors who are often the beneficiaries or claimants.


Conditional vs. On Demand

On Demand performance bonds are typically provided by banks and are an unpopular choice in the UK because the main contractor or employer doesn’t need to prove breach of contract evidence or sue the bondholder to receive payment, meaning there is a greater chance of having to pay out. F R Ball does not offer this kind of bond.

A Conditional Bond is more likely if arranged through an insurance broker, and the only time a payment will be made to a claimant is if the bond holder has failed in their contractual obligations.



If you work in the construction field, you’ll be well aware of the potential price of breaching a contract, so how much does a performance bond cost? The answer is, it varies, but there are ways in which you can keep your insurance outlay to a minimum.

Be stringent with your applications – just like credit applications, multiple requests for performance bonds can be off-putting for providers. An insurance broker can stack up your company history and project requirements to go straight for the provider who they deem the most suitable and affordable for you.

Get organised – You should make a bond application at the contract tender stage.


Costs can be higher if your business is not as well-established, you’ve made claims in the past, or if the performance bond you opt for strays from Association of British Insurers (ABI) standard format, which might be the case if the project you’re tendering for is unusual.

That’s not to say that in these circumstances you won’t be able to secure a bond, and an insurance broker can advise you on the best course of action to find a performance bond that works within your budget while providing your project with the right financial guarantees.

F R Ball is highly experienced in arranging Performance Bonds, providing them for Main Contractors/Principle Contractors such as Sir Robert McAlpine and Welsh Water.

If you would like more information or are about to go out to tender, talk to our advisers on 01873 857533 or email