Questions & Answer

Types of letters of guarantee


Letters of guarantee

Letters of guarantee for tenders and auctions is the letter issued mostly for the benefit of ministries and government departments, institutions and companies to ensure their rights in contracting or supply contracts and are divided as follows:

1. PROVISIONAL LETTER OF GUARANTEE (BID BOND)

It is attached to the contract submitted by the contractor in the tender or bid, and represents a certain percentage of its value in order to reassure the bidder or the bidder of the seriousness of the bids submitted and not to decline the bidder if the prices change or show a mistake, An initial or temporary guarantee is called because its purpose ends by not awarding or awarding the tender to the client or signing the contract. In both cases, the contractor shall recover the letter of guarantee.

2. FINAL LETTER OF GUARANTEE (PERFORMANCE GTEE)
This guarantee shall be submitted by the recipient of the tender in order to ensure the proper implementation of the commitments entered into with the beneficiaries, in accordance with the terms of the contract of contract or supply. The final letter of guarantee shall remain in full value until the end of its purpose or expiration


3. MAINTENANCE GUARANTEE 
After the completion of the implementation of the project, the beneficiary receives it if it emerges and shows that the project was implemented in accordance with the terms and specifications agreed, but in anticipation of the emergence of defects or gaps not visible, and because of the possibility of the need for some repairs and maintenance and repair In order to return the final letter of guarantee to the customer and the bank, the recipient requests that the bank issue a letter of guarantee guaranteeing such repairs or completing any defects that may arise in the project.


4. LETTER OF ADVANCE PAYMENT/ ADVANCE PAYMENT GUARANTEE
An acceptable bidder may use the resources of the tenderer, especially in mega projects, to finance the injustice process, where its own resources are not sufficient to meet its needs, to obtain an advance payment estimated at an agreed percentage of the value of the process and often we use this payment to prepare needs A letter of guarantee shall be issued for the advance payment to ensure its return or refund of the rest of it when settling the account. A percentage of the down payment shall be deducted from the extracts paid against the amount carried out. Thus, the amount of collateral is reduced to the extent of this ratio - and the reduction rate is initially agreed upon. The client waives his entitlements in the transaction to his advantage in order to be aware of the conclusions received regarding the waived process.

5. LETTERS OF GUARANTEE TO THE LOANED THINGS TO THE CONTRACTOR

Such guarantees shall be issued in cases where the beneficiary of the project owner lends to the contractor machinery, equipment or models to complete the process entrusted to him.

Its purpose is to ensure that items on loan are returned in their condition upon completion of the operation