Question

Calculate the payment and performance bond premium for a contract for a building project with an estimated cost of $8.5 million. Project duration is estimated at 14 months. If the project actual cost turns out to be $8.75m (same duration), what is the adjustment for the premium (how much extra should the contractor pay the surety)

Answer 1

Estimated cost of building project: $8.5 million

Actual Cost of building: $8.75 million

Estimated Duration of project completion: 18 months

Actual completion of project: 18 months

Particulars Amount

Estimated Cost (A) $8.50 million

Actual Cost (B) $8.75 million

Balance (C=B-A) $0.25 million

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.