How is a bond calculated?

Performance Bonds are normally 10% of the contract value. Retention Bonds are usually between 2.5 and 5% of the contract value, and Advance Payment Bonds are a fixed sum, depending on the advance payment value.

The bond wording can stipulate that the amount reduces when certain milestones are achieved. For example, upon the issue of the practical completion certificate, the bond amount will reduce by 50%.

Bonds are either calculated on a per annum rate, or a flat rate. The applicable rate will depend on the financial strength of the bonded principal, the Contractor.