Abstract
Despite the introduction and adoption of various techniques and innovative practices
geared towards improving the delivery of construction projects, some notable problems
of cost overrun, time delay, low quality, dissatisfied clients, etc. still persist. One of the
notable practices in the construction industry is the use of bonds and guarantees.
Construction bond was introduced as an instrument to protect or indemnify its recipients
against risks and problems associated with construction projects but the challenge over
the years lies in the practical enforcement of bonding conditions and its overall benefits
to the construction industry. This research therefore evaluate the risks that are associated
with bonded and unbonded projects with a view to ascertaining their effects on overall
construction projects success. Primary data were collected through administration of
questionnaires on identified construction bond stakeholders namely: clients of public
projects: quantity surveying and architectural firms; and construction firms.
Questionnaires were administered on 337 respondents out of which 242 were returned
while 236 were certified fit for analysis. Mean item score was used for ranking the
identified factors while Kruskal-Wallis and Mann-Whitney tests were employed to
examine relationship and differences in sample means of different groups of respondents
respectively. The study revealed that financial soundness of the issuer also known as
credit risk has major effect on projects with bond while for projects without bond,
liquidity risk requires the most attention. The identified bond risks are more inherent in
bonded projects except for liquidity and volatility risk. In view of this, special attention
should be accorded the activities of guarantors, that is banks and insurance companies,
shouldered with the responsibilities of issuing bonds in an attempt to reduce their
influence on construction bond process. This will enhance value for money for
contractors seeking the bonds and eventually lead to success of construction project.