What value does a surety bond bring to a P3 project?

November 21, 2017 - Surety 101

Hello, I’m Sheila Thompson, Principal at Rosenberg & Parker of Canada. What value does a surety bond bring to a Public Private Partnership or a P3 project. The P3 model is based on the assumption that the private sector will provide financing for the project. The project will get built at which point it will generate revenue to pay down the debt. Think of a bridge. If the bridge isn’t then there is no way you can charge tolls to generate that revenue that’s needed to pay down the debt. So a performance bond guarntees the performance of the work will actually happen. A labor and material payment bond will provide coverage to pay subcontractors and suppliers. The surety industry has responded to the P3 market place and we are now seeing bonds for P3 projects that include some cash components, so a cash payment. They include some extra payment that we wouldn’t normally see in a regular bond.
So payments for liquidated damages or delay costs extra financing costs. Those kind of costs can be picked up by a P3 bond. The other side of the P3 market is when the project is actually finished from the construction point of view we move in to the operation and maintenance phase which can last 25-30 years. There can be bonds at that stage as well to guarantee the operation and maintenance of the project. At Rosenberg & Parker our vision is clear and it’s PURE surety.

Our vision is clear and it’s PURE surety