Builders lobby for contract bonds

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The Independent Online
BRITAIN'S top 10 construction companies, including Bovis, Costain and Mowlem, are campaigning for an American-style bonding scheme to reduce competition in the industry.

The group wants the Government to lay down guidelines that would force companies to buy bond cover for the full cost of any contracts which they tender for and win.

The lobbying is directed at Sir Michael Latham, the former Conservative MP, who is carrying out a wide-ranging inquiry into contract abuses and conflicts in the industry.

A detailed report from the inquiry, backed both by the industry and by Tony Baldry, the Environment minister, is expected to recommend sweeping changes to reduce conflict and litigation over contracts when it is published in the next two months.

The builders say that a bond scheme would help to cut down the number of competitive tenders for contracts and improve profit margins to more economic levels. They think the current free-for-all has damaged the industry's reputation.

In the United States, contractors normally have to provide customers with a bond, underwritten by financial institutions, covering the full value of work they hope to win.

If the builder is unable to complete the work, or runs into financial problems, the customer can call in the bond-issuer to fulfil the contract.