As a city, Liverpool is piss poor at managing its council backed infrastructure projects, fucking comical. I am amazed that there is no contracts or commercial department overseeing bid and tender processes if they are, fuck them off immediately. Liverpool City Council could avoid this current mess and the many other contractual project failures within the city if these idiots used performance bonds.
The obligation for the contractor to provide the council with a bond should be set out in the tender documents. The choice of bondsman and terms concerning cost falls entirely to the contractor who secures it before the start of work. From a Liverpool council viewpoint, it is wise to stipulate that the bond stays in place until the final certificate is issued for the defects liability period.
Bonds can be issued either by an insurance company or by a bank, the cost of the bond borne by the contractor (this is likely to be reflected in the contractor's tender price). The bond cost would give the council a good guide as to the creditworthiness and reputation of the contractor in the bond market, which will view each contractor differently in respect of its history, management and financial health.
Strictly speaking, the bond is a guarantee and, as such, is a contingent liability regarding the contractor's balance sheet. A smaller contractor might face a limit on how many bonds it can take out.