Rule 170 - Bid Security | KartavyaDesk
Original Rule Text
Rule 170 Bid Security (i) To safeguard against a bidder's withdrawing or altering its bid during the bid validity period in the case of advertised or limited tender enquiry, Bid Security (also known as Earnest Money) is to be obtained from the bidders except Micro and Small Enterprises (MSEs) as defined in MSE Procurement Policy issued by Department of Micro, Small and Medium Enterprises (MSME) or are registered with the Central Purchase Organisation or the concerned Ministry or Department [or Startups as recognized by Department for Promotion of Industry and Internal Trade (DPIIT)]33. The bidders should be asked to furnish bid security along with their bids. Amount of bid security should ordinarily range between two percent to five percent of the estimated value of the goods to be procured. The amount of bid security should be determined accordingly by the Ministry or Department and indicated in the bidding documents. The bid security may be accepted in the form of [Insurance Surety Bonds]34 Account Payee Demand Draft, Fixed Deposit Receipt, Banker's Cheque or Bank Guarantee [including eBank Guarantee]35 from any of the Commercial Banks or payment online in an acceptable form, safeguarding the
What This Means
Rule 170 of the General Financial Rules (GFR), 2017, deals with Bid Security, also known as Earnest Money Deposit (EMD). Think of it as a safety net for the government. When the government invites bids for a project or to buy goods, it wants to ensure that bidders are serious and won't back out after winning the bid. This rule says that bidders usually have to provide a Bid Security along with their bids. This security protects the government if a bidder withdraws their bid or changes it during the period when the bid is valid.
However, there are exceptions. Micro and Small Enterprises (MSEs), registered with the MSME or Central Purchase Organisation, and Startups recognized by DPIIT are usually exempt from providing Bid Security. The amount of the Bid Security is typically between 2% and 5% of the estimated value of the goods or project. The specific amount is decided by the Ministry or Department doing the procurement and is clearly stated in the bidding documents. The Bid Security can be in the form of a Demand Draft, Fixed Deposit Receipt, Bank Guarantee, or even an online payment.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •Bid Security (Earnest Money Deposit) is required from bidders to prevent them from withdrawing or altering their bids during the bid validity period.
- •Micro and Small Enterprises (MSEs) and Startups (DPIIT recognized) are generally exempt from providing Bid Security.
- •The Bid Security amount typically ranges from 2% to 5% of the estimated value of the procurement.
- •Acceptable forms of Bid Security include Demand Draft, Fixed Deposit Receipt, Banker's Cheque, Bank Guarantee (including e-Bank Guarantee), and online payments.
- •The specific amount and acceptable forms of Bid Security are specified in the bidding documents.
Practical Example
The Ministry of Textiles is inviting bids for the supply of 10,000 meters of specialized fabric, estimated to cost ₹50 Lakhs. According to Rule 170, they specify in the bidding documents that all bidders, except MSEs and DPIIT-recognized startups, must submit a Bid Security of 3% of the estimated value, which is ₹1.5 Lakhs.
XYZ Corp, a large textile manufacturer, submits its bid along with a Bank Guarantee of ₹1.5 Lakhs. However, 'Little Loom' a registered MSE, submits its bid without any Bid Security, citing its MSE registration. If XYZ Corp wins the bid but later refuses to supply the fabric at the agreed price, the Ministry can encash the Bank Guarantee to recover any losses incurred due to XYZ Corp's default.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Frequently Asked Questions
What happens if a bidder withdraws their bid after the bid submission deadline but before the bid validity period expires?▼
Is it mandatory to ask for Bid Security in every tender?▼
What happens to the Bid Security of unsuccessful bidders?▼
Can the procuring entity demand a Bid Security higher than 5%?▼
What is an Insurance Surety Bond?▼
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 Rule 170 of GFR 2017, which of the following entities is generally exempt from providing Bid Security (Earnest Money Deposit)?
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