Route21

thaihome, on 2012-04-10 08:35:37, said:

To answer your 2 points:

1. Guarantees can be used in many scenarios in international contracting situations,  The two situations considered above are a) a Bid Bond and b) a [Contract] Performance Bank Guarantee.

The Bid Bond is primarily to ensure that a bidder doesn't renege on their bid or any commitments they have made during the bidding period.  We had a case, I understand, where a winning bidder, having been awarded the Contract on a [conditional*] "Letter of Award" wanted to renegotiate the legal/commercial Terms and Conditions as a precondition of signing the "hard copy" Contract!  They were advised that they were putting their Bid Bond at risk but still insisted on renegotiation.  I understand that Corporate approval was given to encash the Bid Bond and the Contract was promptly awarded to the second best bidder.  The Bid Bond was used to defray the incremental cost of going to the second best bidder.

* The "Letter of Award" was firm, but conditional on the bidder providing a) the Contract Performance Bond and b) appropriate Insurance documentation etc within a certain number of days of the LoA and signing the "hard copy" Contract.

2. Yes, being able to provide a Bid Bond does help confirm that they are bona fide contenders, but one other thing we used to do was to ask them to provide a letter from a bank (a "Bank Certificate") certifying that, in the event of them winning the Contract, the bank would be prepared to issue the appropriate [Contract] Performance Bond.  If they can't find a bank that is prepared to issue the Performance Bond that would raise cause for suspicion and probably prompt further investigation of their financial position.  They don't actually have to use the same bank for the actual guarantee.

Note: Other forms of guarantee provided, separately, by Contractors, but used in different circumstances, might include a Bank Guarantee enabling any maintenance/tax retention moneys to be released earlier than would otherwise have been the case or a Parent Company Guarantee (particularly if the company concerned was a "paper company" where any assets that you may want access to, in the event of any problems, are owned at a "higher" level in the overall organisation than the company signing the Contract.

PS As an additional level of security, we never advised the unsuccessful bidders or returned any Bid Bonds until the ink was dry on the "hard copy" Contract. The successful bidder only received their Bid Bond back when they had not only signed the Contract but provided the Performance Bond.

Hope this helps
R21

hellodolly, on 2012-04-07 00:02:16, said:

A Bank Guarantee of 5-15% is quite normal in international contracting.  The higher the value of the contract, the more likely the guarantee would be set towards the lower end.

As posted earlier, once the value of the bond is large enough to get the bidder/contractor's top management attention, the law of diminishing returns starts to apply. If it's too high you may also reduce the competitive forces in the bidding, as potential bidders shy away from the increased exposure.  Bear in mind that any bidder/contractor is probably bidding/contracting to other clients with similar high valued contracts. Their potential financial exposure to having any one (or more) of their high value bank guarantees encashed, across all bids/contracts, could therefore be quite high.

In this context, bear in mind the domino effect on security concerns with potential Chinese IT suppliers, as noted in others posts.

Regards
R21

PS  Bonds should not be encashed arbitrarily.  To do so could cause you to lose any reputation you might have had as a responsible potential client - once bitten, twice shy!

geriatrickid, on 2012-04-06 14:53:58, said:

After around 20 years with clients involved in large scale procurement, I agree!
R21

PS I understand that the government haven't actually said they are not going to sign with Scope, just that they can't do so unless and until Scope comes up with the Bond.  I would have done the same.

Skywalker69, on 2012-04-06 13:28:27, said:

I think what you are referring to is what we call a "Letter of Credit", which the buyer (particularly in the case of international deals) may have to provide to guarantee payment.

What the supplier may have to provide is called a "(Bid or Contract) Performance Bank Guarantee".
If the bidder/contractor doesn't perform, the buyer can cash the "Performance Bond", which compensates the buyer for the incremental delay and cost associated with going to another (higher) bidder.  The buyer normally doesn't need to actually "pull" the bond but merely suggest to the erring bidder/contractor that, if they don't sort out their performance, they are putting their Bank Guarantee/bond at significant risk.

If that doesn't get their top management's attention then either the value of the bond is too low or you are contracting with the wrong company!

Hope this helps
R21

chiang mai, on 2012-03-28 15:51:14, said:

Route21, on 2012-02-19 15:41:50, said:

I've been on Loranta now for almost 2 years, with no side effects other than an occasional postural hypotension (low BP) during the hot season out here.
I suspect the hypotension to be really due to dehydration, as a few minutes in the car with the A/C on and a cold drink and I'm fine!  Loranta worked fine for me.  It may or may not work for others.

R21
PS As previously posted, I was recommended Loranta by a clinic in Chiang Mai (details can be sent via a PM if interested).