Beware! Hidden Risks After Project Completion Without a Maintenance Guarantee

Table of Content

The construction industry in Indonesia continues to grow rapidly, driven by the increasing demand for infrastructure and development projects in various regions. However, behind the successful completion of projects, there are hidden risks that contractors often overlook, especially after a project is declared complete. Many assume that once the work is handed over, their responsibility is over. However, the post-project phase actually holds the potential for significant problems that can harm the company’s finances and reputation.

One form of protection often overlooked is a project maintenance bond. This bond is a crucial requirement in every project contract, whether public or private, to ensure the quality of work is maintained during the maintenance period. Without a maintenance bond, contractors face the risk of damage, repair claims, and even loss of trust from the project provider.

This article will thoroughly discuss why maintenance warranties are so important, how to legally manage them, the hidden risks that arise if ignored, and how a professional insurance broker like L&G Insurance Broker can help ensure the safety of your project. Therefore, before risks arise, Get in touch L&G Insurance Broker now at 08118507773 for free consultation before risk.

Why Many Contractors Ignore Maintenance Guarantees

Not a few Contractors often view project maintenance guarantees as merely an administrative formality. In fact, these guarantees represent a professional responsibility that must be fulfilled to maintain work quality and a good relationship with the project owner.

1. Lack of Understanding of Maintenance Assurance Functions

Many implementersprojectThey don’t understand that the maintenance period is a crucial period to ensure that the work remains up to specifications. They only focus on target completion, not on long-term quality after handover.

2. Desire to Save Project Costs

Partly contractors try to cut costs by not taking care of maintenance guarantees, even though this step can actually have fatal consequences. The cost of the maintenance guarantee premium is smaller than the potential loss due to a major repair claim.

3. Lack of Education and Risk Assumption

A number of Many projects, especially small-scale projects, don’t explicitly emphasize the importance of maintenance guarantees, so contractors don’t feel the need to prepare them. They mistakenly believe the risk ends after handover. However, the maintenance period can last up to 12 months after project completion.

In fact, a project maintenance guarantee is not merely an administrative requirement, but rather a financial guarantee that ensures the contractor is accountable for the quality of the work. Without this guarantee, the contractor would be left to bear the cost of repairs if damage occurs after the project is completed.

What Is a Maintenance Guarantee and How Does It Work?

A project maintenance bond is a form of assurance provided by the contractor to the project owner to ensure that the completed work remains in good condition for a specified period after handover. The value of this bond is typically 5% of the contract value.

How it Works and its Benefits

Main Function: Maintenance guarantee is to guarantee that the contractor will repair any damage or defects in the work that appear after the project is completed.
Validity Period: The warranty validity period is usually between 3 to 12 months, depending on the type of project and contract agreement.
Issuance: This type of guarantee can be issued through a bank (Bank Guarantee) or insurance company (Surety Bond).
Efficiency: In terms of efficiency and flexibility, a surety bond is often chosen because the process is faster, does not disrupt the contractor’s cash flow, and is easier to adapt to project needs.

In this case, insurance brokers such as L&G Insurance Broker play an important role in helping contractors choose the right and legally valid guarantee product, ensuring that project maintenance guarantees are issued quickly.

Hidden Risks After Project Completion Without Maintenance Guarantee

BanyaMany contractors believe that once a project is completed and handed over, all responsibility is over. However, it is precisely during this phase that many hidden risks can emerge and harm the contractor.

1. Sudden Physical Damage to Buildings

After use, projects can experience structural cracks, leaks in piping, malfunctions in electrical and mechanical installations, or damage to finishes. These risks can be caused by material defects, imperfect workmanship, or external factors. Without project maintenance coverage, contractors must bear the cost of repairs themselves.

2. Loss of Client Trust and Bad Reputation

WhenIf a project owner discovers damage and the contractor is irresponsible, the company’s reputation will immediately suffer. This hidden risk could impact future tender opportunities, as major clients highly value integrity after a project is completed.

3. Unexpected Repair Costs

For large projects, post-project repair costs can reach hundreds of millions to billions of rupiah. Maintenance guarantees help shift this cost burden to the insurer, protecting the project.cash flow contractor.

4. Lawsuits and Contract Penalties

Some contracts stipulate penalties if the contractor fails to repair defects during the maintenance period. Without project maintenance guarantees, the contractor risks legal action and financial penalties from the owner.

Having a project maintenance guarantee can minimize all these hidden risks. Therefore, it’s crucial to work with a trusted insurance broker to ensure every guarantee document complies with legal requirements.

Strategic Benefits of Having Project Maintenance Guarantee

For professional contractors, project maintenance guarantees not just an obligation, but a strategic investment to maintain business continuity.

1. Maintain Good Relationships and Credibility

Owner Projects will have more confidence in contractors who can guarantee the maintenance of their work. This creates long-term relationships and simplifies project negotiations.new.

2. Increase the Chance of Winning the Tender

Contractors with a complete and legal track record of project guarantees are preferred by both government and private tendering institutions. Maintenance guarantees are an added value that distinguishes professional contractors.nal.

3. Protecting Company Finances from Hidden Risks

If it happensIn the event of post-project damage, a maintenance guarantee helps cover repair costs without disrupting the company’s cash flow. This is vital protection for small and medium-sized contractors.

4. Demonstrate Compliance with Regulations

Own legitimate project maintenance guarantees demonstrate professionalism and compliance with regulations, especially in construction project tenders regulated by LKPP.

So, having a maintenance guarantee isn’t just about complying with regulations, but rather a smart business strategy to maintain a project’s reputation and sustainability. Therefore, ensure you work with an L&G Insurance Broker experienced in managing a variety of project guarantees.

A Quick and Legal Way to Manage Project Maintenance Guarantees

ForFor contractors who want to avoid hidden risks and ensure project safety, here are the steps they can follow to ensure a fast and legal maintenance guarantee process:

Prepare Complete Documents: Collect all supporting documents such as employment contracts, Temporary Handover Report (PHO), and company legality data.
Choose an Authorized Issuing Institution: Ensure the guarantee issuer is licensed by the Financial Services Authority (OJK). Avoid the risk of counterfeit documents.
Use a Certified Insurance Broker: Using an insurance broker like L&G Insurance Broker will streamline the administrative process. The broker will verify documents, perform underwriting, and expedite issuance.
Verify Document Authenticity: Ensure the maintenance guarantee has an official registration number that can be verified by the surety.

Using an insurance broker helpsContractors receive guarantees that meet project needs, with fast issuance times and guaranteed legality. If you want to ensure the guarantee process runs smoothly and safely, Contact L&G Insurance Broker now at 08118507773 for free consultation before risk.

Beware of Fraud and Fatal Project Guarantee Errors

1. Risk of Guarantee Fraud

In recent years, there has been an increase in fraud cases, project guarantees, including maintenance guarantees. The main method is to offer very low premium prices or promise an overly fast process, but use a guarantee letter.lsu (fraudulent bond).

2. Common Modes Contractors Need to Be Aware of

Document guarantee using the name of an insurance company not registered with the OJK.
There is no official registration number (surety bond) that can be verified.
The party offering the guarantee does not have a clear office address or official broker business license.

As a result, contractors could face serious legal risks. Project owners have the right to reject fraudulent guarantee documents and remove contractors from their list of authorized suppliers, damaging their reputation.

The Role of Insurance Brokers in Avoiding the Risk of Fraud

ManagingProject maintenance guarantees are often complex, involving extensive documentation and strict regulatory compliance. This is where the role of an insurance broker becomes vital for contractors.

1. Consultation and Analysis of Guarantee Needs

Brokers act as risk consultants, analyzing your project contract to determine the appropriate project maintenance bond value, appropriate validity period, and the most efficient surety type (Bank Guarantee or Surety Bond). They help contractors avoid miscalculating the bond value.

2. Access to Official and Trusted Guarantee Publishers

Brokers have extensive networks with insurance companies (surety companies) and banks officially registered with the Financial Services Authority (OJK). This ensures that the project maintenance guarantee you receive is legal, valid, and accepted by the owner without risk of rejection.

3. Speed up the Underwriting and Issuance Process

By mastering the underwriting procedures, brokers can help contractors prepare all the necessary documents quickly and in a structured manner. This is crucial to ensuring the guarantee is issued on time and within the contract deadline.

4. Competitive Premium Negotiation

Based on the project volume and the contractor’s track record, brokers can negotiate the best premium rates with surety companies. Contractors receive cost-effective project maintenance coverage without compromising on the quality of coverage.

5. Full Support During the Claim Period

If damage occurs during maintenance and the owner files a claim, the insurance broker will assist the contractor and owner in the claims administration process. This role ensures the claim is processed fairly, promptly, and in accordance with the warranty provisions, allowing the contractor to focus on project repairs.

Please Contact L&G Insurance Broker now at 08118507773 for free consultation before risk to get this professional support.

Conclusion

Lots of contractors assume that once a project is completed, all responsibility is over. In fact, the maintenance period is the true test of work quality, and hidden risks such as physical damage and loss of reputation lurk. Without project maintenance guarantees, contractors can lose trust, reputation, and even finances.

A maintenance guarantee isn’t just an administrative formality, but a form of legal protection every professional contractor should have. To ensure the entire process is fast, secure, and compliant with regulations, be sure to use the services of an experienced, licensed insurance broker.

Therefore, before risks come and your project faces problems, make sure all your guarantees are safe with the right experts.

Source:

DON’T WASTE YOUR TIME AND SECURE YOUR FINANCIAL AND BUSINESS WITH THE RIGHT INSURANCE.

HOTLINE L&G 24 JAM: 0811-8507-773 (CALL – WHATSAPP – SMS)

Website: lngrisk.co.id

Email: halo@lngrisk.co.id