admin“Bid security” means a monetary assurance given by a bidder and guaranteed by a bank or other third party. A procuring entity may require bidders to provide bid security in order to deter irresponsible bids and encourage bidders to fulfil the conditions of their bids.
A bid security is used by the procuring entity as protection against bidders withdrawing their bids prior to the end of their bid validity period, or for refusing to sign a contract. The bid security is given by a bidder and guaranteed by a bank or other third party that:
If the bidder withdraws his or her bid before the end of the bidding period;
If the bidder refuses to sign the procurement contract if selected, the bidder will forfeit the bid security amount to the procuring entity.
A bid security may be calculated as a percentage of the budget estimate of a procurement requirement or a percentage of a bidder’s bid price. However, if the procurement method used does not permit revealing the allocated budget, care must be taken to set the bid security as a fixed amount or as a percentage of the bidders’ bid rather than as a percentage of the allocated budget.
A requirement for the provision of bid security:
Shall be stated in the procurement documents.
Shall be imposed equally on all bidders.
The value of any bid security shall be expressed as a fixed amount, which shall be not more than two per centum of the estimated price of the procurement requirement. In determining the amount of bid security required from bidders, a procuring entity shall take into account:
The cost to bidders of obtaining the bid security;
The estimated price of the procurement requirement;
The risk of bidders failing to fulfil the conditions of their bids; and the procuring entity shall fix an amount in the currency specified in the bidding documents, which is high enough to deter irresponsible bids but not so high as to discourage competition.
Where bid security is required, the bidding documents shall state the fact, and that :
The undertaking by which the bid security is given shall be in the format and wording set out in the bidding documents; and
Bid security shall be given in a form acceptable to the procuring entity, which may be:
A certified bank cheque: or
A bank guarantee; or
A cash deposit to the Authority: or
Any alternative form permitted by the Authority to facilitate participation by small enterprises in procurement; and
Bid security shall be valid for the period stated in the bidding document, which shall normally be twenty-eight days after the end of the bidding period.
Notwithstanding that bid security shall be given in the form acceptable to the procuring entity as highlighted above, bidding documents may provide an alternative arrangement whereby bidders are required to sign and submit with their bid-securing declaration in an appropriate form set out in the bidding documents.
Where the Authority receives bid security in the form of a cash deposit, the Authority shall as soon as possible deposit the cash in a Trust account kept at a registered banking institution in terms of Section (93) of the Public Procurement and Disposal of Public Assets (General) Regulations, 2018.
A bid security may be forfeited only in the event of:
The bidder modifying or withdrawing his or her bid after the end of the bidding period; or
The bidder refusing to accept a correction of an arithmetical error appearing on the face of his or her bid; or
The successful bidder failing to sign the procurement contract in accordance with the terms set out in the bidding document;
The successful bidder failing to provide security for the performance of the procurement contract, if required to do so by bidding documents.
The procuring entity shall release bid securities promptly to unsuccessful bidders upon expiry of the term of the securities or upon conclusion of a procurement contract with the successful bidder and submission of any required performance security, whichever is earlier: provided that bid security provided by the winning bidder shall not the released until any required performance security has been received.
Bids shall remain valid for the period indicated in the bidding documents, and if a bidder modifies or withdraws a bid while it is valid the bidder shall forfeit any bid security he or she may have provided in respect of the bid.
Return of bid security
The security deposits or bid bonds are returned at two different events:
Successful bidder: Upon receipt of contract security or bonding.
Unsuccessful bidder: upon award of the contract to the successful bidder.
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