This is required in connection with submission of Tenders for Contracts. The purpose is to guarantee that the Bidder (Contractor), if awarded the Contract will enter into the Contract to furnish the required Performance Bond. Apart from being a guarantee, it also qualifies the Contractor to bid for a Contract.
Thus it in effect satisfies two purposes.
This is required to guarantee the Contractor for the due performance of the Contract as per its terms and specification.
This is required by the oblige (Employer) to secure the Advance Payment made to the Contractor. That is, to guarantee that funds advanced for the purpose of the contract is duly utilized for the intended purpose.
It is required where the Contractor desires to be paid up front the percentage of money the Employer usually retains until after successful completion of contract i.e. after the maintenance period.
