Chapter 3 — Government Procurement & Bidding
What Is Performance Security After Contract Award?
Performance Security is a post-award procurement requirement connected with the successful bidder's contractual obligations. A Performance Bond is only one possible form of Performance Security where the rules and bidding documents allow it.
Direct answer
Performance Security is a requirement that may apply after a bidder is awarded a contract. It supports the successful bidder's performance of contractual obligations. A Performance Bond is a surety bond that may be used as one form of Performance Security where permitted by the current procurement rules and bidding documents.
Performance Security vs. Performance Bond
Performance Security is the requirement. It may describe what the successful bidder must provide, when it must be provided, who it benefits, how long it must remain in force and what forms are acceptable.
A Performance Bond is a surety bond form. It is not automatically the same thing as Performance Security. The bidding documents and contract should be reviewed to determine whether a performance bond is allowed and what wording or conditions apply.
The obligation being supported
A Performance Bond usually supports the Principal's performance of the bonded contractual obligation, subject to the bond terms. The underlying contract defines the Principal's obligations to the Procuring Entity or project owner, while the bond defines the Surety's undertaking.
Those two documents are connected, but they are not identical. The scope of each depends on the applicable contract, procurement documents, bond wording, circumstances and law.
The three parties
Principal
The Principal is the successful bidder, contractor, supplier or service provider responsible for the underlying contractual obligation.
Obligee
The Obligee is usually the Procuring Entity or other party named as beneficiary of the performance security.
Surety
The Surety is the company issuing the performance bond, subject to its evaluation, underwriting, terms, approval and issuance process.
When it may be required
Performance Security may be required after award and before or during contract implementation, depending on the procurement rules and bidding documents. The documents should state the applicable requirement, acceptable forms and submission instructions.
Do not assume that the Bid Security submitted at the bidding stage carries over or automatically becomes the post-award Performance Security.
What applicants should check
Applicants should review:
- Whether Performance Security is required after award
- Whether a performance bond is a permitted form
- The required amount or basis stated in the documents
- The correct Principal and Obligee
- The exact contract or obligation to be referenced
- Required bond wording or prescribed form
- Validity or effective-period requirements
- Issuer requirements, if stated
- Submission timing and instructions
Important limitations
A Performance Bond does not guarantee project success. It does not automatically complete the project. It does not automatically pay the Obligee upon demand unless the bond terms, applicable documents, circumstances and law support a claim.
SuretyPH may facilitate information and document submission for a bond inquiry, but it does not approve bonds or decide whether a procurement submission is compliant.
Key takeaway
Performance Security is the post-award requirement; a Performance Bond is only one possible form where allowed. Read the award documents, contract and bond wording before assuming what is required or covered.
Related topics
Relevant bond information
Need information about a surety bond requirement?
Submit an inquiry with your project details, and SuretyPH will organize your submission for the applicable insurer's evaluation.
Important Notice
Inquiries and supporting documents submitted through SuretyPH may be referred to the applicable participating insurer for evaluation. Submission does not constitute approval or issuance of a surety bond. Applications are subject to the insurer's requirements, evaluation, underwriting, terms, conditions, and approval.
SuretyPH is a digital platform for surety bond information, inquiries, requirements and request tracking. It does not underwrite, approve, bind, issue, or guarantee any insurance policy or surety bond. Evaluation, underwriting, approval, pricing and issuance are undertaken by the applicable licensed insurance company.