11.3  Parent guarantees

(a)  Government may seek performance guarantees from the parent companies of the private party or of the material sub-contractors where this represents value for money.

(b)  Generally, government prefers that performance bonds (whether bank guarantees or insurance bonds) be given by sub-contractors (in favour of the private party) as they can be called upon on clearly defined terms and their pricing is more transparent. However, this will depend on whether the commitment of a parent company is an important element in the selection of the private party or a material sub-contractor.

(c)  Where government is concerned with the creditworthiness of the sub-contractor (and its parent, where a parent guarantee is given) it may require performance bonds directly from the private party in addition to those provided by the sub-contractor.