4.3.1 In the construction industry, performance bonds are generally given by Construction Contractors as a form of guarantee of completion (the amount guaranteed is usually a percentage of the construction price). They can be called by the recipient when, for example, the Planned Service Commencement Date is missed. Accordingly, the Contractor and its financiers may well require a performance bond from the Construction Sub-Contractor. The Construction Sub-Contractor will pass through the cost and timing effects of providing such a bond to its customer (i.e. the Contractor), who will in turn pass them on to the Authority. As with liquidated damages, the consequences of the Authority itself requiring a performance bond - in addition to any bond required by the Contractor and its financiers - is likely to be an increased Unitary Charge and longer build period. Again, this may not give the Authority value for money.63
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63 The reasons for not requiring parent company guarantees (see Section 4.4.2) are equally relevant when considering Authority demands for performance bonds. However, for corporately financed projects see section 37 (Corporate Finance).