Tender security is essentially a guarantee provided by a bidder (Tenderer) to the entity inviting bids (the Procuring Entity) in a tendering process.
Purpose and Protection
The primary purpose of tender security is to protect the Procuring Entity from potential losses or disruptions caused by irresponsible or non-compliant actions of bidders during the tender evaluation period. As stated in the reference, the Tender Security or Tender Securing Declaration is "required to protect the Procuring Entity against the risk of Tenderer's conduct which would warrant the security's forfeiture." This means it acts as a safeguard, allowing the Procuring Entity to compensate itself if a bidder's behaviour violates the tender rules and procedures, specifically actions that are serious enough to justify claiming the security, as outlined in the tender documents (e.g., pursuant to ITT sub-Clause 19.9).
How it Works
Think of tender security as a commitment from the bidder. By submitting tender security along with their bid, a company signals its serious intent to participate and abide by the rules. If the bidder fails to meet certain obligations outlined in the tender documents, the Procuring Entity has the right to "forfeit" or claim the security amount.
Common Forms
Tender security can take several forms, depending on the requirements specified in the tender documents:
- Bank Guarantee: A commitment from a bank to pay a specified sum to the Procuring Entity if the bidder defaults on their obligations. This is a common and widely accepted form.
- Certified Cheque: A cheque certified by the bank, guaranteeing that funds are available.
- Tender Securing Declaration: A written statement or commitment signed by the bidder, often used in place of a monetary guarantee, particularly in some jurisdictions or for smaller tenders. It typically involves consequences like disqualification from future tenders if obligations are not met.
- Other Forms: Sometimes, other forms like a cashier's cheque or a bond might be accepted.
Actions Leading to Forfeiture
The specific instances where tender security can be forfeited are detailed in the tender documents' Instructions to Tenderers (ITT). Based on the reference, forfeiture occurs due to "Tenderer's conduct which would warrant the security's forfeiture". Common examples of such conduct include:
- Withdrawing the tender after the submission deadline but before the end of the bid validity period.
- Refusing to accept the award of the contract if their bid is successful.
- Failing to sign the contract within the specified timeframe after receiving the award notification.
- Failing to provide required performance security (a separate guarantee needed after contract award) within the stipulated time.
- Engaging in fraudulent or corrupt practices during the tendering process.
By requiring tender security, the Procuring Entity ensures that bidders are serious and committed, reducing the risk of delays, costs, and complications that arise when a selected bidder defaults.
