You won a bid: 7 guarantees that may appear later and how to prevent them from stalling the contract. Bid bonds.

Company executives celebrate winning a bid while legal and financial teams immediately begin reviewing the contract, project timeline, and necessary guarantees for execution.

Winning a bid is excellent news.

After weeks —or even months— preparing technical and economic proposals, documents and commercial conditions, the award finally arrives.

But winning doesn't mean the process is over.

In many contracts, this is precisely when a second stage begins that can be just as important: establishing the necessary guarantees to be able to sign, receive an advance payment, execute the project, and properly close the deal.

And here a common problem arises.

Some companies prepare their economic and technical proposal perfectly, but leave the guarantees until the last minute.

Then they receive the award and discover that they have only a few days to present a performance guarantee, that the advance payment requires another guarantee, or that the text requested by the beneficiary needs authorization from the surety company.

The result could be:

• delay in signing;

• inability to receive the advance;

• pressure on treasury;

• need to obtain documentation urgently;

• beneficiary's observations;

• and even jeopardize an opportunity that had already been won.

The best strategy, therefore, is not to start thinking about guarantees after winning.

It consists of identifying them from the moment the tender is analyzed.

The bid bond is just the beginning. Bid bonds.

Bid bonds. When we talk about bid bonds, many companies only think about bid security or bid retention.

However, depending on the terms, the contract, and the nature of the operation, different guarantees may exist during the project cycle.

The diagram can be viewed as follows:

Tender → award → contract signing → advance payment → execution → delivery → warranty period → release

Different obligations may arise at different times.

That's why it's important to analyze the entire project and not just the guarantee needed today.

1. Guarantee of maintaining the offer or tender

This guarantee appears during the bidding process itself.

Its general objective is to support the seriousness of the proposal submitted by the participant and the obligations established in the corresponding terms and conditions.

Depending on the procedure, it may seek to protect the convener against situations such as the participant withdrawing their proposal or subsequently failing to formalize the corresponding obligations.

Why should you review it in advance?

Because the exact conditions depend on the bases.

Before submitting the proposal, it is advisable to verify:

• amount;

• validity;

• beneficiary;

• guaranteed obligation;

• required text;

• conditions for its cancellation.

A small error in a warranty can become a problem within a highly formal procedure.

2. Performance bond

You won.

Now you'll probably have to sign the contract.

And here comes one of the most important guarantees: the performance bond .

Its function is to guarantee the contractual obligations assumed by the supplier, contractor or service provider, within the terms specifically established in the policy and the contract.

It can be used in contracts for:

• construction site;

• supply;

• services;

• maintenance;

• facility;

• supply;

• specialized projects.

The most common mistake

Wait until you have the signed contract before starting the process.

It is much better to send the draft contract and terms and conditions to your surety advisor in advance.

This is how it can be reviewed:

• amount;

• percentage required;

• validity;

• obligations;

• policy text;

• special conditions.

This allows problems to be detected before the delivery deadline starts.

3. Advance payment guarantee

In certain contracts, the beneficiary provides resources in advance to allow the contractor or supplier to begin work.

For example, to acquire:

• materials;

• machinery;

• supplies;

• inventory;

• equipment;

• resources needed to start the project.

That money normally needs to be guaranteed.

The advance payment deposit appears there.

The policy guarantees the obligations related to the correct application, amortization or return of the advance in accordance with the conditions of the contract and the guarantee itself.

Here, time does cost money.

If the company does not provide the guarantee on time, the advance payment may be delayed.

And that can lead to a complicated situation:

You won the project, but you don't yet have the resources planned to start it.

Therefore, if the terms and conditions include an advance payment, the corresponding guarantee should be analyzed before the award is made.

4. Guarantee of good quality or hidden defects

Finishing the work does not necessarily mean that the warranties have ended.

In construction, supply or installation contracts, a subsequent guarantee may be requested to cover:

• defects;

• hidden defects;

• failures;

• quality deficiencies;

• responsibilities after receipt.

The validity period will depend on the contract and applicable regulations.

A common mistake

Consider this guarantee until the moment of project delivery.

It is advisable to know from the beginning how long the responsibility will remain in effect after delivery.

This allows for proper planning of both the cost and the necessary securing capacity.

5. Contract modifications, agreements and extensions

Here is another risk that many companies underestimate.

The original contract may change during execution.

They can be modified:

• amounts;

• deadlines;

• scope;

• volumes;

• delivery dates;

• obligations.

And a contractual modification can have consequences for existing guarantees.

It should not be automatically assumed that a bond originally issued covers any subsequent modifications.

To do?

Whenever there is a relevant amendment to the agreement, it is advisable to immediately review it with the surety advisor to determine if necessary:

• modify the policy;

• increase amount;

• extend validity;

• issue an endorsement;

• obtain consent from the surety company.

The rule of thumb is simple:

If the guaranteed obligation changes, also review the guarantee.

6. Extensions and renewals of validity

Projects don't always finish exactly when planned.

A project can be delayed.

A supply can be extended.

The beneficiary may grant an extension.

But changing the contract date may also require checking the validity of the guarantee.

This point is especially important because the contract and warranty must be kept properly aligned.

A contract extension that is not analyzed from the perspective of the guarantee can generate subsequent problems.

7. Release or cancellation of bonds

This is probably the most forgotten stage.

The company ended.

He handed it over.

Collection.

And then move on to the next project.

However, the bond may remain registered within your surety line if the extinction of the obligations is not properly proven and the cancellation is processed accordingly.

This may affect the capacity available for future operations.

What documents might be important?

Depending on the type of contract and guarantee, documents such as the following may be relevant:

• delivery and acceptance reports;

• settlements;

• beneficiary's records;

• documents that prove compliance;

• express releases.

There is no single procedure that works for all cases.

The important thing is to follow up on the bail until its proper release .

The real risk: winning the contract without having the capacity to guarantee it.

There is one question that should be asked before submitting a proposal :

If I win, will I be able to provide all the bonds they're going to ask for?

This question is especially important when we talk about large contracts.

A surety company can analyze, among other things:

• financial situation;

• equity capital;

• liquidity;

• experience;

• amount of the obligations;

• record;

• technical capacity;

• counter-guarantees;

• jointly liable, where applicable.

Therefore, participating first and reviewing the consolidation capacity later may be a bad strategy.

When should you start processing the bonds?

Ideally:

Before submitting the proposal

Identify all the guarantees that establish the bases.

Before the ruling

Prepare or update your file with the surety company.

After the award

Send the contract and the required texts for validation immediately.

During execution

Report modifications, extensions and renewals.

When finished

Obtain the necessary documents to manage the release.

This transforms bail from a last-minute problem into a controlled process.

Checklist: What to review before participating in a tender

Before submitting your proposal, please check:

Spot	Ask
Contest	Do I need a guarantee to participate?
Compliance	What percentage or amount do I need to guarantee?
Advance	Is there an advance payment required, and how much must be guaranteed?
Quality	Will there be a warranty after delivery?
Validity	How long will each warranty be valid?
Text	Is there a mandatory bond text?
Surety	Do they require specific institutions or characteristics?
Ability	Do I have enough bandwidth to broadcast them?
Counter-guarantees	What guarantee could the surety company request?
Modifications	How will agreements and extensions affect things?
Release	What document will allow the cancellation of each bond?

This analysis should be done before even defining the final price of the proposal , because the guarantees are part of the cost and financial structure of the project.

A bond should not be the last thing left to pay in a tender.

There is a huge difference between the two scenarios.

Company A: wins the contract and then asks what it needs to obtain the bonds.

Company B: before bidding, it already knows the amounts, requirements, guarantee capacity, approximate costs and necessary documentation.

The two may have won exactly the same bid.

But the second one is much better prepared to turn that award into an enforceable and profitable contract.

That is the true value of planning for warranties.

Winning a bid is just the beginning.

Later, performance bonds, advance payments, good quality bonds or hidden defects may appear, in addition to modifications and extensions related to the development of the contract.

And when the project is finished, there is still one last task: to properly release the warranties.

The best strategy is to stop considering bonds as documents that are requested after winning.

They should be part of the project analysis even before the proposal is submitted .

Because winning a bid is important.

But being prepared to sign it, finance it, execute it, and complete it correctly is what ultimately turns that award into a business.

Are you going to participate in a tender or have you just received an award?

At We Link we can review the terms and conditions and the contract with you to identify from the beginning the guarantees you will need and help you structure the surety process.

We can help you with:

• competition or tender bonds;

• compliance;

• advance;

• good quality and hidden defects;

• construction and supply;

• modifications and extensions;

• follow-up until the release of the guarantees.

Don't wait until you win to find out if you can get the bail.

Request advice from We Link