The contractor shall furnish a performance bond of equal to ____% of the contract amount and ____% payment bond, to be replaced by the ______ bond.

The contractor shall furnish a performance bond of equal to ____% of the contract amount and ____% payment bond, to be replaced by the ______ bond.

• A. 10 percent of the contract amount and 10 percent payment bond, to be replaced by the assurance bond.
• B. 15 percent of the contract amount and 15 percent payment bond, to be replaced by the guarantee bond.
• C. 20 percent of the contract amount and 20 percent payment bond, to be replaced by the security bond.
• D. 25 percent of the contract amount and 25 percent payment bond, to be replaced by the guarantee bond.

Answer: (D)

The main concept here is how bonds function to protect the project owner: a performance bond guarantees that the contractor will complete the project per the contract, and a payment bond guarantees that subcontractors and suppliers will be paid. In this item, the standard practice is to require both bonds at 25% of the contract amount, with the two bonds later replaced by a single guarantee bond. This arrangement provides substantial security up front while simplifying ongoing security once certain milestones are met or the project progresses to the warranty phase. Why this is the best choice: 25% for both bonds gives solid protection for both performance and payment obligations without imposing excessive upfront cost on the contractor. Replacing the two separate bonds with a guarantee bond aligns with common procurement practice, offering a unified guarantee that covers the contractor’s commitments under the contract. Why the other options don’t fit: they propose lower percentages, which would reduce the level of security, and the replacement term used here is “guarantee bond,” not the other terms listed. The combination in this option matches the typical schedule and terminology used in this context.

The main concept here is how bonds function to protect the project owner: a performance bond guarantees that the contractor will complete the project per the contract, and a payment bond guarantees that subcontractors and suppliers will be paid. In this item, the standard practice is to require both bonds at 25% of the contract amount, with the two bonds later replaced by a single guarantee bond. This arrangement provides substantial security up front while simplifying ongoing security once certain milestones are met or the project progresses to the warranty phase.

Why this is the best choice: 25% for both bonds gives solid protection for both performance and payment obligations without imposing excessive upfront cost on the contractor. Replacing the two separate bonds with a guarantee bond aligns with common procurement practice, offering a unified guarantee that covers the contractor’s commitments under the contract.

Why the other options don’t fit: they propose lower percentages, which would reduce the level of security, and the replacement term used here is “guarantee bond,” not the other terms listed. The combination in this option matches the typical schedule and terminology used in this context.