Money in a bid: the four sums, what each protects, and when each comes back

The four sums, in the order a bidder meets them

This is general information; confirm with the tender document and your adviser.

A government tender asks for money at four points, and each sum guards the buyer against a different failure. The older name for bid security is earnest money deposit, or EMD; security deposit is also called retention money.

No percentage is stated on this page. Each band is stated once on this site, by the piece linked from the section that needs it. What this page carries is the timing: how long each sum stays valid, and when it comes back.

One deduction sits outside all four: a government buyer also deducts tax at source under two Acts before paying a bill, and the rates and thresholds are a question for an adviser.

Tender fee

The Goods Manual is plain about the first sum: “Normally, no tender document fee should be charged.” The same paragraph, 5.2.1, allows an exception: a procuring entity “may fix a bare minimum cost of tender documents to defray the expenses/ effort of preparing documents, drawings, etc.” Where a buyer does charge one, the notice inviting tender states the amount and how it is paid. It pays for the document; it is the one sum here that is not a deposit.

A micro or small enterprise does not pay it. The MSE order's own FAQ says MSEs are “facilitated by providing them tender sets free of cost”. The proof of that status is Udyam registration; what else the order gives, and who is outside it, is in What the MSE policy gives and does not.

Bid security, or earnest money

Bid security is the deposit furnished with the bid. It protects the buyer against the bidder, not against the contract: a bidder who withdraws or changes the bid during its validity, or who wins and then refuses to sign or to furnish performance security, forfeits it. A bid that arrives without it is not read: “Any bid not accompanied by the requisite bid security shall be rejected as non-responsive in accordance with provisions of the bidding document.”Department of Expenditure, Ministry of Finance

How much is Rule 170(i)'s question, and the band is stated once on this site, in EMD exemptions and the bid securing declaration. What this page owns is when it comes back, and there are three dates.

• Its own validity. Under Rule 170 the bid security “is normally to remain valid for a period of forty-five days beyond the final bid validity period”, so the instrument furnished with the bid must outlast the bid validity itself.
• The winner's refund. GFR Rule 171(iii): “Bid security should be refunded to the successful bidder on receipt of Performance Security.” Nothing comes back to the winner until the performance security is in.
• Everyone else's refund. The Goods Manual, paragraph 6.1.1: “Bid securities of the unsuccessful bidders should be returned to them as soon as possible after the expiry of the final bid validity period and, at the latest, by the 30th day after the award of the contract.”

Both refunds run from events on the buyer's side (the award, the receipt of performance security) rather than from the bid deadline. The tender document governs: it names the instrument, the validity and the manner of return.

Who is exempt, and the declaration instead

Rule 170 names three classes exempt from bid security: micro and small enterprises as the MSE order defines them, bidders registered with the central purchase organisation or with the buying ministry or department, and start-ups recognised by DPIIT. In place of money, Rule 170(iii) says a buyer “may require Bidders to sign a Bid securing declaration”, an undertaking under which a bidder who withdraws or modifies the bid during its validity, or who is awarded the contract and fails to sign it or to furnish performance security by the deadline, is suspended from bidding with that buyer for the period the tender states. The declaration costs nothing to give and something to break.

Whether the exemption reaches a particular bidder in a particular tender (a works tender above all) is the tender document's answer; why departments answer it differently, and the pandemic-era direction some tender formats still echo, are in EMD exemptions and the bid securing declaration.

Performance security

Performance security is the sum the winner furnishes after award and before the contract is signed. It protects the buyer against a winner who does not perform: late delivery, goods that fail, a contractor who leaves the site. Rule 171(i), as amended by the Department of Expenditure's order of 1 January 2024, sets one band for goods, consultancy and non-consultancy services and a wider one for works, and the works band includes the security deposit. Both bands, the dates by which the sum is due and what missing that date costs are stated once on this site, in After you win.

What this page owns is how long it must last. GFR Rule 171(ii): “Performance Security should remain valid for a period of sixty days beyond the date of completion of all contractual obligations of the supplier including warranty obligations.”Department of Expenditure, Ministry of FinanceOn works the same clock runs beyond the defect liability period: the 2019 edition of the Works Manual says the security “should remain valid for a period of 60 (sixty) days beyond the date of completion of all contractual obligations of the contractor, including Defect Liability Period (DLP)”.

The date that matters is therefore not the day the work is finished but the end of the warranty, or of the defect period, plus the days the rule adds. The tender document governs that date.

Security deposit and retention on works

Works contracts hold a second sum during execution. The 2019 Works Manual describes it as a share of each running bill (each periodic or interim payment) withheld as security deposit or retention money until final acceptance, in addition to the performance security, and releasable against a bank guarantee. It protects the buyer against what a finished-looking work can hide, and it comes back only at acceptance. The same manual lets the earnest money roll into it rather than come back: “The earnest money instead of being released may form part of the security deposit.”

In the GFR the two post-award sums on works are counted together: the footnote to Rule 171(i) that records the 1 January 2024 amendment says the amount of performance security plus security deposit or retention money for works “will continue” within one combined band. The share of each bill and the band are After you win's figures; this page carries only the shape, and the glossary the words for security deposit.

What the rules accept as security

The list of instruments is the same for bid security and for performance security. The Works Manual's paragraph 5.1.1(3) says bid security “may be obtained in the form of insurance surety bonds, account payee demand draft, banker's cheque, or bank guarantee (including e-bank guarantee)”, and Rule 170(i) as amended adds a fixed deposit receipt and payment online to the same list. The list widened in 2022, when insurance surety bonds and electronic bank guarantees were added by two Department of Expenditure orders; the orders and their dates are in After you win, and the glossary has the insurance surety bond and the electronic bank guarantee.

Nothing on this page says what any instrument costs; the tender document says which of the rule's instruments this buyer takes.

GeM is different

On the Government e Marketplace the money terms are the marketplace's own. Its General Terms and Conditions set their own line for performance security: the marketplace recommends a figure and gives the buyer a range around it. Those figures are stated once, in Selling on GeM. The caution money GeM once took from sellers is gone: its seller FAQ says of that provision, “The provision was discontinued in 2025.” What changed for sellers, and when, is in What changed on GeM for sellers.

What the MSE policy does not exempt

The MSE order's exemptions stop at the bid. Its FAQ answers the question in one line: “No, there is no exemption on Security Deposit/ Performance Bank Guarantee under the Policy.” So a micro or small enterprise that paid no tender fee and furnished no bid security still furnishes the performance security, and any security deposit the contract provides for, in full. The order's scope, the classes of business outside it and the rest of its FAQ answers are in What the MSE policy gives and does not.

Where each figure lives

This is general information; confirm with the tender document and your adviser.

The four timings above (bid security's validity, the winner's refund, every other bidder's refund, performance security's validity) are the GFR's and the manuals', each cited where it is stated. Every percentage is stated once on this site, by the piece that owns it:

• The bid-security band, who is exempt, and what the declaration commits a bidder to: EMD exemptions and the bid securing declaration
• The performance-security bands, the due dates, the share of each running bill, the instruments and their dates: After you win
• GeM's own performance-security line and its caution money: Selling on GeM
• The MSE order's scope, its free tender sets and its EMD exemption: What the MSE policy gives and does not

Where each sum falls in a tender is on The tender lifecycle; what a bidder holds before any is asked for is on Before you can bid; the rules they sit inside are on The rules.