Question 1

What is a surety bond in Ghana?

Accepted Answer

A surety bond in Ghana is a three-party contract where an insurance company (surety) guarantees to a project owner (obligee) that a contractor or business (principal) will fulfil their contractual obligations. If the principal defaults, the surety pays up to the bond value. Common types include Bid Bonds, Performance Bonds, Advance Payment Bonds, and Customs Bonds.

Question 2

How is a bond premium calculated in Ghana?

Accepted Answer

Bond premiums in Ghana are calculated using the NIC Appendix 11 bond tariff. The rate depends on the bond type: Bid Bonds are 0.5% (min GHS 300), Performance Bonds are 1.6% on the first GHS 10m and 0.65% on the remainder, Retention Bonds vary by Defect Liability Period (2–5%), and Customs Bonds are 1% on the first GHS 1m. VAT of 20% applies where applicable.

Question 3

What is the difference between a Bid Bond and a Performance Bond in Ghana?

Accepted Answer

A Bid Bond in Ghana guarantees that a contractor who wins a tender will enter into the contract — it protects the project owner from a contractor backing out after winning. A Performance Bond guarantees that the contractor will complete the work as specified — it covers the cost of completing the project if the contractor defaults during execution. Performance Bonds are typically 10% of the contract value.

Question 4

What is a Retention Bond in Ghana?

Accepted Answer

A Retention Bond in Ghana allows a contractor to receive the retention money held by the project owner before the Defect Liability Period (DLP) expires, in exchange for a bond of equivalent value. The bond premium rate depends on the DLP length: 2% for under 12 months, 3% for 12–24 months, 4% for 24–36 months, and 5% for 36 months or more.

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