A guarantee is a promise from a bank or insurer to the client that the contractor will meet its obligations. If the contractor fails, the client can call the guarantee. On Indonesian government procurement, guarantees can be bank guarantees or surety bonds (Perpres 46/2025 Article 30).
Kinds of guarantee and their amounts
| Guarantee | What it covers | Usual amount | Runs until |
|---|---|---|---|
| Bid | The bidder does not withdraw after winning | As the tender documents say, often 1% to 3% of the HPS | The contract is signed |
| Appeal (sanggah banding) | When a bidder files an appeal | As the tender documents say | The appeal is decided |
| Performance | The work is completed as contracted | 5% of the contract; 5% of the HPS if the offer is below 80% of it | First handover (PHO) |
| Down payment | The down payment is repaid through payment deductions | The down payment amount | The down payment is fully deducted |
| Maintenance | Defects are fixed during the maintenance period | 5% of the contract, replacing retention | Final handover (FHO) |
For a Rp1 billion contract with a 20% down payment: a Rp50 m performance guarantee, a Rp200 m down payment guarantee and a Rp50 m maintenance guarantee. The 5% retention can be replaced by a maintenance guarantee, so payments are made in full (Perpres 16/2018 Article 53).
Guarantee costs and cash flow
- The bank or insurer charges a fee (commission or premium). Ask for the rate before tendering, and include it in the tender overhead.
- Bank guarantees usually need collateral or a cash deposit. That money cannot be used on the project: put it in the cash flow.
- Record each guarantee’s expiry date, and extend it before it lapses if the project is late.
- Ask for guarantees back as soon as their conditions are met, so the collateral or bank limit can be used again.
Common mistakes
- A performance guarantee expiring while the project is late, so the client can call it.
- Guarantee costs left out of the tender price.
- A guarantee format that does not match the tender documents, so the bid is disqualified.
- Forgetting to ask for the down payment guarantee back once the down payment is repaid.
The full guide is in How to create a construction finance report in Google Sheets. It has a free template (Excel or Google Sheets) and a checker that reads your own workbook.
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Common questions
What kinds of construction guarantee are there?
Bid, appeal, performance, down payment and maintenance guarantees, as bank guarantees or surety bonds.
How large is the performance guarantee?
Usually 5% of the contract value; on government tenders 5% of the HPS if the offer is below 80% of it.
How does retention differ from a maintenance guarantee?
Retention is part of a payment held back; a maintenance guarantee replaces it with a bank or insurance guarantee, so the payment is received in full.
References
- BPK Central Sulawesi: guarantees in government procurement (Indonesian): kinds and amounts
- Hukumonline: retention and maintenance guarantees (Indonesian): 5% retention, Article 53