Para 9.2.5 - Performance Security | KartavyaDesk
Original Rule Text
ii) for any loss or damage recoverable from the contractor which the Procuring Entity may suffer or be put to for reasons of or due to above defaults/ failures/ neglect; iii) and in either of the events aforesaid to call upon the contractor to maintain the said performance security at its original limit by making further deposits, provided further that the Procuring Entity shall be entitled, and it shall be lawful on his part, to recover any such claim from any sum then due or which at any time after that may become due to the contractor for similar reasons. d) The performance security should be refunded to the contractor without interest, after he duly performs and completes the contract in all respects but not later than 60(sixty) days of completion of all such obligations including the warranty under the contract. No claim shall lie against the Procuring Entity regarding interest on cash deposits or Government Securities or depreciation thereof. Return of Bid/ Performance Securities should be monitored by the senior officers 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. 10. Obligations under the Labour Codes and Rules: The Contractor is solely responsible for its obligation under Labour Codes and Rules relating to personnel deployed by it onsite or off-site for execution of the contract. However, the procuring entity should proactively monitor that such obligations are discharged by the contractor. Contractor shall be asked to submit relevant reports and returns. 11. Obligations Relating to Occupational Safety, Health, Working Conditions, Social Security, and Industrial Relations Requirements: Contractor is legally bound to comply with statutory requirements regarding accommodation, Creche, safety, Hygiene, Health and Medical facilities, Government Welfare Schemes, etc. He shall be asked to maintain adequate records in this regard. The Procuring Entity shall proactively monitor that such obligations are discharged. 12. Obligations relating to Site, Environmental Laws, and Third Parties: The Contractor has obligations regarding safety and security of the site used by him. He has to comply with laws relating to environment at the site. He also is liable for any injury/ damage to third party personnel and properties as a result of his activities at the site. 13. Obligations to Maintain Insurances: Contractor must maintain Insurance cover at his own cost against all such risks as mentioned in the contract. Procuring Entity has to ensure that these Insurance Cover are adequate and current during the contract execution.
What This Means
Para 9.2.5 of the Manual for Procurement of Non-Consultancy Services deals with the performance security provided by the contractor. Think of performance security as a safety net for the government. It ensures that if the contractor messes up – doesn't deliver on time, provides substandard service, or neglects their duties – the government can recover losses from this security. The government can use the security deposit to cover any damages or losses caused by the contractor's failures. The contractor might also be asked to top up the security if it's used to cover losses, bringing it back to the original amount. The government can also deduct money owed from any payments due to the contractor for similar issues.
Once the contractor has successfully completed the contract and fulfilled all obligations, including any warranty periods, the performance security is returned to them. This return should happen within 60 days of completion, and no interest is paid on the security amount. Senior officers are responsible for monitoring the return of these securities to avoid delays. To increase transparency, the procuring entity should list the details of these securities on their e-Procurement Portal or website, if possible. The rule also emphasizes the contractor's responsibility for labor laws, occupational safety, environmental compliance, and insurance, with the procuring entity proactively monitoring compliance.
This explanation was generated with AI assistance for educational purposes. Always refer to the official gazette notification for authoritative text.
Key Points
- •Performance security protects the Procuring Entity from contractor defaults.
- •The Procuring Entity can recover losses from the performance security due to contractor failures.
- •The contractor may be required to replenish the performance security if it's used.
- •Performance security is refunded within 60 days of contract completion, without interest.
- •Procuring Entities should proactively monitor contractor compliance with labor, safety, and environmental regulations.
Practical Example
The Ministry of Housing and Urban Affairs awarded a contract to 'CleanSweep Pvt Ltd' for cleaning services in a government building. CleanSweep provided a performance security of ₹5,00,000. After a month, the cleaning quality deteriorated significantly, leading to complaints and requiring the Ministry to hire additional temporary staff at a cost of ₹1,00,000. The Ministry invoked Para 9.2.5 and recovered ₹1,00,000 from CleanSweep's performance security to cover the additional expenses. CleanSweep was then asked to deposit another ₹1,00,000 to bring the performance security back to ₹5,00,000. Once CleanSweep completed the contract satisfactorily, the remaining ₹5,00,000 was refunded within 60 days.
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 the contractor doesn't replenish the performance security after it's been used?▼
Is the 60-day period for refunding the performance security mandatory?▼
Who is responsible for ensuring the contractor complies with labor laws?▼
What kind of insurance should the contractor maintain?▼
What if there is a delay in refunding the 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 9.2.5 of the Manual for Procurement of Non-Consultancy Services, within how many days of the completion of all contractual obligations, including warranty, should the performance security be refunded to the contractor?
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