Question

Calculate the payment and performance bond premium for a contract for a building project with an...

Calculate the payment and performance bond premium for a contract for a building project with an estimated cost of $12.5 million. Project duration is estimated at 18 months. If the project actual cost turns out to be $12.75m (same duration), what is the adjustment for the premium (how much extra should the contractor pay the surety)?

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Answer #1

Details Given:

Estimated cost of building project: $12.5 million

Actual Cost of building: $12.75 million

Estimated Duration of project completion: 18 months

Actual completion of project: 18 months

Working:

Particulars Amount
Estimated Cost (A) $12.50
Actual Cost (B) $12.75
Balance (C = B - A) $0.25

Since the period of estimation of project completion and actual completion of project is same i.e. 18 months, the contractor has to pay $0.25 million extra.

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