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Piptan Finance / Banking instruments / Performance Guarantees
BANKING INSTRUMENTS · 04

Performance Guarantees

Assurance to a project owner that a contractor will complete the work to specification — standard on UAE construction and infrastructure contracts, typically 5–10% of the contract value.

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WHO IT'S FOR

Built for delivery assurance.

Main contractorsMeeting a tender requirement for a performance bond before contract award.
SubcontractorsProviding security to a main contractor on a package of works.
EPC & engineering firmsBacking delivery obligations on design-and-build or turnkey contracts.
Suppliers on tendered contractsSecuring a supply obligation that forms part of a larger project.
STRUCTURE & THE NUMBERS

Where this typically lands.

Indicative figures: every case is confirmed against the specific bank, transaction and applicant profile.

5–10%Of contract value, typical bond amount
On-demand or conditionalBond types available
Project + DLPValidity through the defects liability period
5–10 daysTypical issuance once contract is awarded
HOW IT WORKS

From award to release.

01
Contract award confirmedThe awarded contract specifies the bond amount, wording and validity period required.
02
Bank assessmentThe bank reviews your company's track record, financials and the cover available.
03
Wording matched to the contractThe bond wording is checked against the employer's contract clause before submission.
04
Bond issued to the employerThe bank issues the performance bond directly to the project owner or employer.
05
Released at completionThe bond is released, or reduced, at practical completion and again at the end of the defects liability period.
A NOTE FROM THE DESK

“Employers reject bonds for mismatched wording more often than for the amount. We check it against the contract clause first.”

FREQUENTLY ASKED

Common questions.

What's the difference between an on-demand and a conditional bond?

An on-demand bond pays the employer on simple demand, with no proof of default required — the UAE market standard. A conditional bond requires the employer to prove the contractor's breach, which is rarer and usually only accepted on larger, negotiated contracts.

Does the bond cover the full contract value?

No — typically 5 to 10% of the contract value, occasionally higher on higher-risk projects. The percentage is set in the tender documents, not negotiated after award.

When exactly is it released?

Usually in two steps: a partial reduction at practical completion, and full release at the end of the defects liability period, once the employer confirms no outstanding claims.

Ready to secure your contract award?

Share the tender or contract documents and we'll confirm the bond terms your project requires.

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