Para 8.7.3 - Performance Security | KartavyaDesk
Original Rule Text
8.7.3 Performance Security The consultant receiving the LoA is required to furnish the required performance security, if it is part of tender conditions, in the prescribed form within period prescribed in the tender document (generally 14 (fourteen) to 28 (twenty-eight), depending on the amount), as per para 6.1.2 above. In case performance security is not submitted within the stipulated time, procuring entity may pursue the contractor upto a reasonable grace period further for submission. In case the firm fails to submit the requisite Performance Security even thereafter or fails to sign the contact it may be treated as withdrawal of offer by L1 or H-1 bidder (as the case may be), and the tender may be reinvited, besides taking necessary punitive actions including forfeiture of EMD against such bidders.
What This Means
Para 8.7.3 of the Manual for Procurement of Consultancy Services deals with Performance Security. Think of Performance Security as a guarantee. If a consultant wins a bid and receives a Letter of Award (LoA), this rule says they might need to provide a 'performance security' to the government. This security acts as insurance for the government, ensuring the consultant will actually do the work they promised. It's like a safety net if the consultant fails to deliver. Whether or not performance security is required is determined by the tender conditions.
The rule also specifies a timeframe for submitting this security, usually between 14 to 28 days, depending on the project's value. If the consultant doesn't provide the security within this time, the government can give them a little extra time. However, if they still fail to provide it, the government can cancel the contract, re-invite tenders, and even take action against the consultant, including forfeiting their Earnest Money Deposit (EMD). This rule affects consultants bidding for government projects and the government departments procuring these services.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •Consultants receiving a Letter of Award (LoA) may be required to furnish Performance Security if specified in the tender conditions.
- •The Performance Security must be submitted within the timeframe prescribed in the tender document (typically 14-28 days).
- •Failure to submit the Performance Security within the stipulated time may lead to contract cancellation and forfeiture of EMD.
- •The procuring entity may grant a reasonable grace period for submission of Performance Security.
- •Non-submission can be treated as withdrawal of offer, leading to re-invitation of the tender and punitive actions.
Practical Example
M/s TechSolutions wins a consultancy bid for developing a new e-governance portal for the Department of Information Technology for ₹50 Lakhs. The tender document specifies that a Performance Security of 5% of the contract value (₹2.5 Lakhs) must be submitted within 21 days of receiving the LoA. TechSolutions, due to internal delays, fails to submit the Performance Security within the initial 21 days. The Department of IT grants them a 7-day grace period. However, TechSolutions still fails to submit the security. Consequently, the Department cancels the contract, forfeits TechSolutions' EMD of ₹50,000, and re-invites the tender. TechSolutions is also blacklisted from participating in future tenders for a specified period.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What is the purpose of Performance Security?▼
What happens if the consultant fails to submit the Performance Security within the given time?▼
Is Performance Security always required for consultancy contracts?▼
What is the typical timeframe for submitting Performance Security?▼
Can the procuring entity extend the deadline for submitting Performance Security?▼
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Test Your Knowledge
Question 1 of 3
According to Para 8.7.3 of the Manual for Procurement of Consultancy Services, what is the typical timeframe within which a consultant receiving a Letter of Award (LoA) must furnish the required performance security?
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