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Construction Law/Performance Security


Dear Sir

What is the difference between the Performance Bond and Parent Company Guarantee.

What is the advantage of Parent Company Guarantee instead of Performance Bond for the Employer.



Dear Sudantha,

Thanks once again.

The major difference between Performance Bond and PCG is that the party issuing PB is a third party, like a bank or insurance company while that of PCG is parent company. Here, the parent company is guaranteeing a sister or subsidiary company of its performance of the obligation under a contract with an employer. Depending on the requirement of the contract and the Employer, PB or PCG could be provided to guarantee a Contractor's performance under a contract.

The advantages of PCG over PB depend on how you are viewing it and also on the wordings of the guarantee documents. one could say, one of the advantages is that dealing with a parent company may be easier than dealing with a third party. Another could be that the extent of the guarantee if provided by the third party is limited to the amount stated in the guarantee but in PCG, it could be worded (or if the contract specified it to be so) to cover consequential damages which could be forced upon the parent company to shoulder since the parent company is seen as a large entity that should be responsible for performance of the contract wherein its subsidiary company has defaulted.


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Femi Alofe


I can answer all questions relating to the followings: 1. Contract Administration - variations, contract clauses interpretation, all post contract procedures, valuations and certificates questions, extension of time issues and prolongation cost matters. 2. Contract Practice - Any questions regarding forms of contract like JCT, FIDIC & other Bespoke forms. 3. Quantification, measurements and Estimating questions 4. Contracts and construction law questions and dispute resolutions problems. 5. All FIDIC Conditions of contracts


Out of my 24 years experience in construction industry, i have the following specific experience: 1. Contract Administration - 15 years in contract administration with over 10yrs in Managerial positions covering africa and the middleeast. 2. Contract Practice - 15 years experience with over 10yrs in Managerial and expert positions covering africa, north america and the middleeast. 3. All pre-contract procedures, Tendering, Quantification, measurements and Estimating questions - 20 years experience. 4. Contracts and construction law questions and dispute resolutions problems - 15 years experience with over 10yrs in Managerial and expert positions and 5 years expert witness and active practice in arbitration proceedings covering africa and the middleeast.

1. FAIQS - Fellow, Australian Institute of Quantity Surveyors, Australia 2. FRICS - Fellow, Royal Institution of Chartered Surveyors, UK 3. CCP - Certified Cost Professional AACEI, USA 4. PQS - CIQS, CANADA 5. ACIArb. - CIArb, UK 6. MNIQS - NIQS, NIGERIA 7. RQS - QSRBN, NIGERIA

1. AACEI RP on Estimating, 2010

1. B.Tech (QS) 2. RICS professional course, CEM - UK 3. MSc , UK NARIC 4. Professional Doctorate ( to commence 2016)

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1. Larsen & Toubro Ltd, Dubai UAE 2. Larsen & Toubro (oman) LLC 3. Archi + Web consortium, Abuja Nigeria 4. George Dike & Associates, Minna Nigeria 5. Public works Authority (Ashghal), Doha Qatar

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