Para 6.1.2 — GOODS_MANUAL

6.1.2 Performance Security (Rule 171 of GFR 2017) 1. To ensure due performance of the contract, performance security (or Performance Bank Guarantee (PBG) or Security Deposit (SD)) is to be obtained from the successful bidder awarded the contract. Unlike contracts of Works and Plants, in the case of contracts for goods, the need for Performance Security depends on the market conditions and commercial practice for the particular kind of goods. Performance security should be for an amount of three (3) to five (5) per cent (3 to 10% for Works) of the value of the contract, as specified in the tender documents99. The procuring Entity may stipulate an upper ceiling for the Performance Security amount. For an illustrative example, the ceiling can be Rs 75 Lakhs for tenders upto Rs 50 Crores and Rs 3 Crore for tenders above Rs 50 Cr but below Rs 300 Cr. For tenders of higher value than this, the Procuring Entity may decide the amount of Performance Security (but not less than Rs 3 Cr mentioned above). However, Procuring Entities are free to decide their own upper limits for performance security, with the approval of Competent authority and finance concurrence, based on their perception of performance risks vis-a vis need for competition. Performance security may be furnished in the form of an Insurance Surety Bond100, account payee demand draft from a commercial bank, bank guarantee (including e-bank guarantee101) issued/confirmed from any of the commercial banks in India, or online payment in an acceptable form, safeguarding the purchaser's interest in all respects. In the case of GTE tenders, the performance security should be in the same currency as the contract and must conform to the Uniform Rules for Demand Guarantees (URDG 758) – an international convention regulating international securities102. Unlike the procurement of Works, in the procurement of Goods, the concept of taking part of the Performance Guarantee as money retained from the first or progressive bills of the supplier is not acceptable.

2. Submission of Performance Security is not necessary for a tender value upto Rupees 50 (twenty-five) lakh. 3. Procuring Entity may exempt the following entities (on their specific requests or otherwise) from submission of Performance Security: a) 103Govt. Ministries, Departments, Attached and Subordinate Offices, Autonomous bodies, b) OEM in whose favour PAC, in tenders issued against PAC. 4. Performance Security is to be furnished by a specified date (generally 14 (fourteen) to 28 (twenty-eight) days after notification of the award, depending on the amount), and it should remain valid for a period of 60 (sixty, or any other period mentioned in the tender Documents) days beyond the date of completion of all contractual obligations of the supplier, including warranty obligations. 5. In the case of Goods contracts (e.g., Rate Contracts and other long-term contracts) spanning over multiple years, Procuring entities may consider proportionately reducing performance security in proportion to the balance contract period, wherever feasible, instead of retaining the full performance security over the complete contract period which may be of 2-3 years or may be more. 6. The performance security will be forfeited and credited to the procuring entity’s account in the event of a breach of contract by the contractor. It should be refunded to the contractor without interest after he duly performs and completes the contract in all respects (full performance security should be forfeited, even if the Contractor has partially executed the work) but not later than 60(sixty) days of completion of all such obligations, including the warranty under the contract. The senior officers should monitor the return of Bid/ Performance Securities, and delays should be avoided. If feasible, the details of these securities may be listed in the e-Procurement Portal/ website of the Procuring entity to make the process transparent and visible.