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Para 5.4 - Bid Security (EMD) | KartavyaDesk

Goods Manual

Original Rule Text

6.1.1 Bid Security (Rule 170 of GFR 2017) 1. To safeguard against a bidder’s withdrawing or altering its/ his bid during the bid validity period in the case of advertised (OTE and GTE tenders) or special limited tender enquiry Bid Security (also known as Earnest Money Deposit (EMD)) is to be obtained from the bidders along with their bids95. The amount of bid security should ordinarily range between two (2) to five (5) per cent of the estimated value of the goods to be procured. The amount of bid security, rounded off to the nearest thousands of Rupees, as determined by the Procuring Entity, is to be indicated in the tender documents. Bid security may be obtained in the form of insurance surety bonds96, account payee demand draft, banker's cheque, or bank guarantee (including e-bank guarantee) 97 from any of the commercial banks or payment online in an acceptable form. In case the bid security is more than a threshold (Rupees five lakh) and in case of foreign bidders in GTE tenders, it may be in the form of a bank guarantee (in equivalent Foreign Exchange amount, in case of GTE) issued/ confirmed from any of the commercial banks in India in an acceptable form. The bid security is normally to remain valid for a period of 45(forty-five) days beyond the final bid validity period.

What This Means

Para 5.4 of the Manual for Procurement of Goods, 2017, which refers to Rule 170 of 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 submitting their offers. This rule says that bidders usually need to provide a Bid Security along with their bid. This security protects the government if a bidder withdraws their bid or changes it during the period when the bids are valid.

This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.

Key Points

  • •Bid Security (EMD) is required to prevent bidders from withdrawing or altering bids during the validity period.
  • •The amount of Bid Security typically ranges from 2% to 5% of the estimated value of the goods being procured.
  • •Acceptable forms of Bid Security include insurance surety bonds, demand drafts, banker's cheques, bank guarantees (including e-bank guarantees), and online payments.
  • •For bids exceeding ₹5 lakh, and for foreign bidders in Global Tender Enquiries (GTE), a bank guarantee is often required.
  • •The Bid Security should remain valid for 45 days beyond the final bid validity period.

Practical Example

The Ministry of Textiles is floating a tender to procure 10,000 cotton bales, estimated to cost ₹2 crore. As per Para 5.4, they decide to set the Bid Security at 3% of the estimated value, which comes to ₹6 lakh. M/s. Desi Textiles submits a bid along with a bank guarantee of ₹6 lakh valid for 135 days (90 days bid validity + 45 days). If M/s. Desi Textiles wins the bid but then refuses to supply the cotton bales at the agreed price, the Ministry can encash the bank guarantee to recover any losses incurred due to the breach of contract. If M/s. Desi Textiles is not selected or fulfills the contract terms, the bank guarantee will be returned to them.

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 to the Bid Security if my bid is unsuccessful?▼
If your bid is not selected, the Bid Security will be returned to you after the tender process is complete, usually after the contract is awarded to the successful bidder.
Can the Procuring Entity demand more than 5% as Bid Security?▼
Ordinarily, the Bid Security should range between 2% and 5%. Deviations from this range would require strong justification and approval from higher authorities within the Procuring Entity.
What is the purpose of the 45-day validity extension beyond the bid validity period?▼
This extension provides the Procuring Entity with sufficient time to finalize the contract and address any potential disputes or issues that may arise after the bid validity period expires.
If I submit an e-bank guarantee, do I still need to submit a physical copy?▼
The specific requirements regarding physical copies of e-bank guarantees should be clearly stated in the tender document. Generally, an authenticated electronic copy is sufficient, but always refer to the tender document for definitive instructions.
Is Bid Security applicable for all types of procurement?▼
Bid Security is generally applicable for advertised tenders (Open Tender Enquiry and Global Tender Enquiry) and special limited tender enquiries. The tender document will specify whether Bid Security is required.

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 5.4 of the Manual for Procurement of Goods, 2017, what is the typical range for the amount of Bid Security (EMD) required from bidders?

Related Rules

Para 9.4Manual for Procurement of Goods, 2024 - Para 9.4 - Chapter 9Para 9.5.5Manual for Procurement of Goods, 2024 - Para 9.5.5 - Chapter 9Para 1.8.2Manual for Procurement of Goods, 2024 - Para 1.8.2 - Chapter 1Para 2.2.2Manual for Procurement of Goods, 2024 - Para 2.2.2 - Chapter 2Para 2.2Manual for Procurement of Goods, 2024 - Para 2.2 - Chapter 2

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