Construction Bonds Effect for Novice Construction Firms in Kampala Uganda

International Journal of Research and Scientific Innovation (IJRSI) | Volume VIII, Issue XII, December 2021 | ISSN 2321–2705

Construction Bonds Effect for Novice Construction Firms in Kampala Uganda

Gilbert Ahereza, Hussein Muhaise, Abdul Qayoum Lawal, Mohammad Mustafa Mundu
School of Engineering and Applied Sciences, Kampala international University, Uganda

her farmer to do the duties on his behalf and share the proceedings equally, a local merchant acted as surety and effected the compliance of the second farmer to the agreement. Suretyship grew up steadily over years and has today taken root in many business transactions requiring guarantors. In Construction projects, surety bonds are fundamental as construction projects are a risky business and at times referred to as a war fare. Apart from mobilization of materials and labor there is usually a divergence between project teams. The cause of divergent views between the project owner, principal contractor, sub contractors and the architect arrive from the payments allocations for all the concerned in the construction project. There is high entry new firms into construction ventures in Uganda, an investment that is fragile by nature of operations which is motivated the need for creating awareness on construction bonds that are vital for all parties involved in the construction project. This paper aims to craft knowledge on surety bonds /construction bonds to the novice construction companies getting aboard of the construction industry in Uganda. The study applied literature review, generalizations and systemization methods to diffuse the concept of construction bonds to the novice construction contractors as they enter the volatile construction business particularly in Kampala, Uganda.
Key words: Surety bonds, construction bonds, construction contracts.

I. INTRODUCTION

A surety bond can be defined as the legal agreement between three parties involved in a construction project i.e. the principal, obligee and a surety. Where the company to perform the works is the principal, the oblige is the party that requires the service provider to secure a surety bond usually a government representative and the surety is the guarantee to the obligee that your company will do all the contracted duties in respect of the agreement made[5]. The surety bond protects the third party hiring your company to perform the project from the unforeseeable losses that would result from your company failing to complete the works as agreed [7]. In essence surety bonds provide financial security and construction assurance to the project owners that the contractors will perform all the work contracted and pay all sub contractors and laborers and material suppliers [8].

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