The performance bond is to make up for the economic losses caused to the employer in order to prevent the contractor from violating the contract provisions or breaching the contract during the execution of the contract.

The performance bond can prevent the contractor from violating the contract provisions or breaching the contract during the execution of the contract, and ensure that the contractor fully performs the contract, and the performance period and quality conform to the contract; Ensure the standardization of the market operation of bidding contractors and put an end to unreasonable bidding.

The performance bond collection standard should follow the following principles:

1, which means that the amount of performance bond should be equal to the amount of contract advance payment, so as to reflect the fairness principle of relevant regulations;

2. The amount of the performance bond has nothing to do with the bid bond. According to the relevant regulations, the bid bond shall not exceed 2% of the estimated price of the project subject to tender, and the performance bond is generally 5% to 10% of the contract amount. Generally speaking, the amount of performance bond will be higher than the bid bond. After the winning bidder is determined and the two parties sign the contract, the bid bond of the winning bidder can be converted into a performance bond, and the deficiency is made up by the winning bidder. If the bidder gives up the bid within the validity period of the bid or gives up after winning the bid, the tenderer may confiscate all the bid bond but not the performance bond.

3. The determination of the amount of the performance bond should be linked to the contract payment terms, and the performance bond is generally returned synchronously with the progress payment;

4. According to relevant laws and regulations, the performance bond shall not exceed 10% of the contract amount.

To sum up, the performance bond is to make up for the economic losses caused to the employer in order to prevent the contractor from violating the contract provisions or breaching the contract during the execution of the contract.

Legal basis:

Article 26 of the Regulations for the Implementation of the Bidding Law of the People's Republic of China

Where a tenderer requests a bidder to submit a bid bond in the tender documents, the bid bond shall not exceed 2% of the estimated price of the project subject to tender. The validity period of bid bond shall be consistent with the validity period of bid. The bid bond submitted by the domestic tendering unit in the form of cash or cheque for a project that must be subject to tender according to law shall be transferred from its basic deposit account. The tenderer shall not misappropriate the bid bond.