PT Arya Konstruksi, a mid-sized contractor based in Batu Ampar, has just won a tender for a facility building in the Kabil industrial estate valued at IDR 8.5 billion. On the director's desk sit two documents from the insurance company: a bid bond certificate used during the bidding process, and a request to immediately issue a performance bond before the contract is signed.
"Isn't the bid bond enough?" the director asks his team.
The answer: no. This is the most common misunderstanding that catches new contractors in Batam off guard. This article breaks down the differences in full.
What Is a Surety Bond — and Why Are There Multiple Types?
A surety bond is not a single product — it is a family of guarantee instruments, each designed to secure a specific phase and obligation in a construction or procurement project lifecycle.
Under Indonesia's government procurement framework (Presidential Regulation 16/2018), there are at least four types of surety bonds:
The bid bond and performance bond are the two most commonly confused — because both are issued in adjacent phases of the procurement cycle, just before and immediately after the contract is signed.
Bid Bond: Guaranteeing Intent and Capability at the Tender Stage
A bid bond (or jaminan penawaran in Indonesian) is a surety bond certificate issued to guarantee that the contractor participating in a tender is serious about its bid, is capable of fulfilling the contract requirements, and will not withdraw after being named the winner.
Illustration Example
Bid Bond Claim Trigger
A claim occurs if the tender winner refuses to sign the contract or fails to submit the performance bond within the specified timeframe. The contractor's reputation on the LPJK procurement system may also be affected.
Performance Bond: Guaranteeing Project Completion to Spec
A performance bond (or jaminan pelaksanaan) is issued after the contractor has been named the winner and is ready to sign the contract. Its function: to guarantee that the contractor will complete the work according to the technical specifications, agreed schedule, and quality standards required.
Illustration Example (continued)
The performance bond value is significantly larger than the bid bond — because failure during execution causes far greater losses to the project owner.
Performance Bond Claim Triggers
- • Halting work before completion without valid justification
- • Failure to meet technical specifications after being given the opportunity to remedy
- • Declared insolvent and unable to continue the project
Side-by-Side Comparison: Bid Bond vs Performance Bond
| Aspect | Bid Bond | Performance Bond |
|---|---|---|
| Project phase | Before contract — during the tender process | After the contract is signed |
| Primary function | Guarantees seriousness of the bid | Guarantees project completion |
| Guarantee value | 1–3% of bid value | 5% of contract value |
| Validity period | During the tender process | During project execution |
| Issued when | Before submitting bid documents | Before contract signing |
| Released when | Tender concludes (for losing bidders) | PHO / provisional handover |
| Claim trigger | Winner withdraws / refuses to sign | Default during execution |
| Claim impact | Relatively limited (smaller value) | Significant (larger value) |
| Regulatory basis | Presidential Regulation 16/2018 | Presidential Regulation 16/2018 |
Chronological Flow in a Single Project Cycle in Batam
The bid bond always precedes the performance bond and the two are never active in the same phase. Understanding this flow lets you prepare documents earlier and avoid the delays that frequently trip up contractors.
Projects in Batam That Routinely Require Both Bonds
Batam's project ecosystem spans multiple sectors and authorities — all of which require bid bonds and performance bonds.
BP Batam (Batam Authority)
Infrastructure projects — roads, utilities, and Batu Ampar port facilities — always require both bid bonds and performance bonds under Presidential Regulation 16/2018. Projects typically exceed IDR 1 billion, making both bonds mandatory.
Batam City Government
School buildings, health clinics, and drainage projects in Bengkong, Sekupang, and Batam Centre generally require both bonds, with varying contract values across districts.
Private Industrial Estates
Projects in Muka Kuning, Batamindo, and Nongsa managed by private entities typically follow the same standards as government procurement — since many factory tenants are multinationals with equivalent requirements.
Energy Projects
PLN Batam and industrial estate energy suppliers often require performance bonds with values above the standard rate, given the operational risk from delays affecting tenant production lines in Kabil and surrounding areas.
Cost Estimate: A Full Project Cycle at IDR 5 Billion
As a general illustration, here is the estimated total surety bond cost for a hypothetical project in Batam with a contract value of IDR 5 billion.
| Type | Guarantee Value | Estimated Cost |
|---|---|---|
| Bid Bond (2%) | IDR 100 million | IDR 500K – IDR 1 million |
| Performance Bond (5%) | IDR 250 million | IDR 2 million – IDR 5 million |
| Advance Payment Bond (20%) | IDR 200 million | IDR 1.5 million – IDR 3 million |
| Maintenance Bond (5%) | IDR 250 million | IDR 1 million – IDR 2.5 million |
| Total estimate | — | IDR 5M – IDR 11.5M |
Practical Tips for Batam Contractors
Prepare your company documents well in advance
Your deed of establishment, NPWP, NIB, IUJK, and SBU must always be valid and ready. Many contractors lose opportunities because an expired SBU is only discovered at the tender stage.
Factor issuance time into your tender schedule
For standard values, a bid bond can be issued within 1–2 working days. Don't wait until the day before the document submission deadline.
Don't confuse bid value with contract value
The bid bond is calculated from the bid value (which may differ from the final contract value after negotiation). The performance bond is calculated from the agreed contract value.
Understand the claim clauses in your certificate
Read carefully what conditions allow the obligee to file a claim. Not every delay or scope change automatically triggers a performance bond claim.
FAQ
Frequently Asked Questions
Can a bid bond be used as a substitute for a performance bond?+
How long does a contractor have to submit a performance bond after being named the winner?+
Is the bid bond automatically returned if the company does not win the tender?+
What happens if project delays are caused by force majeure?+
Can one insurance company issue all surety bond types for a single project?+
Learn More About Surety Bonds
This article is based on Presidential Regulation 16/2018 on Government Procurement of Goods/Services, OJK regulations on licensed surety companies, and practical experience assisting contractors in Batam. Specific conditions for each project may vary — please consult our team before making decisions.