3.32 Some contracts may also contain the option to procure a performance bond as an alternative to setting up a retention fund. A performance bond is a way of protecting the authority against the risk the SPV fails to complete the rectification work. In the event the SPV does not complete the work, the bond provides compensation to the authority. We only identified one instance where a performance bond was being used. In this contract the bond lasts for five years after contract expiry. If any defects in the assets are identified and attributable to the former SPV, the bond can be used to finance the work. The size of the bond is driven by an asset condition survey carried out two years before expiry. We have been told that in this example, the cost of the performance bond was borne entirely by the SPV. This may not be the case in other contracts as it is likely the cost is passed on to the authority via a higher unitary charge.