Operations and Maintenance Bonds | BBi Ireland

An Operations and Maintenance Bond is a surety bond that supports the performance of a facility or asset once construction is complete and it has moved into the operational phase. It gives the project owner comfort that the operator will continue to run and maintain the asset to the standards agreed in the contract.​ 

A construction performance bond focuses on delivering the build phase in line with the construction contract, up to practical completion. An Operations and Maintenance Bond applies after completion and backs the longer-term obligation to operate, maintain, and service the facility during the operational period.​ 

O&M Bonds are often specified in long-term contracts such as design–build–operate arrangements, PPP/DBO projects, or service concessions where the contractor is responsible for running the facility after construction. Public sector clients and infrastructure owners may make an O&M Bond a condition of award or financial close.​ 

These bonds are widely used on water and wastewater treatment plants, energy and power assets, industrial plants, transport infrastructure, and complex building services contracts. Any project where ongoing performance, availability, or output is critical to the end user may be a candidate for an O&M Bond.​ 

The bond can support obligations such as meeting defined performance and availability levels, complying with maintenance schedules, responding to breakdowns within agreed timeframes, and adhering to statutory and safety requirements. The underlying operations contract sets the standards, and the bond reflects those obligations up to the agreed bond limit.​ 

The duration of an O&M Bond is linked to the operations period specified in the contract, which could range from a few years to a decade or more depending on the project. In some cases, the bond may be renewed or adjusted at agreed review points as the risk profile of the facility changes over time.​ 

As with other surety bonds, there are three parties: the operator or contractor (the principal), the project owner or authority (the obligee), and the surety company that issues the bond. The surety promises the obligee that the principal will fulfil its O&M obligations, subject to the bond terms.​ 

If the operator is in default under the operations contract and does not remedy the issue, the project owner can submit a claim under the bond within the bond conditions. The surety may compensate the owner up to the bond amount or arrange for alternative performance, and will typically seek recovery from the operator for any amounts paid.​ 

The bond sum is usually calculated as a percentage of the annual or total contract value for the operations period, taking into account the potential cost of non-performance or replacement services. The exact level is normally negotiated between the parties and set out in the tender or contract documents.​ 

BBi Ireland can review your operations contract, clarify the performance and maintenance obligations, and source appropriate O&M Bond facilities from dedicated surety underwriters. The team can also coordinate O&M Bonds with other required bonds, such as performance, bid, or retention bonds, to create a joined-up surety solution for your project.