Bid bonds in tenders

When is a bid bond required?

The contracting authority may, but is not required to, demand it. In our database, a bid bond is present in 28% of active domestic proceedings. If your company is just starting out and does not want to tie up cash, it is worth treating this as a criterion for selecting proceedings — proceedings without a bid bond make up a large part of the market.

Forms of payment

• Cash — a bank transfer to the contracting authority's account. This is the simplest method but the riskiest in terms of deadlines: the moment the funds are received counts, not the moment the transfer is ordered.
• Bank guarantee — does not tie up cash, but the bank charges a commission and usually requires creditworthiness.
• Insurance guarantee — more accessible to smaller companies than a bank guarantee, with a similar effect.
• Surety — less common, provided by entities specified in the regulations.

Three mistakes that cost you the proceeding

1. Late arrival. A transfer sent on the day of bid submission may not arrive in time. For larger amounts and interbank transfers, allow for at least two business days of buffer.
2. Conditional guarantee. It must be irrevocable, unconditional, and payable on first demand. Any provision requiring the contracting authority to perform additional actions makes it defective.
3. Insufficient validity period. The guarantee must cover the entire period of the bid validity. If the proceeding is extended, the guarantee must be extended along with it.

When the contracting authority retains the bid bond

This most often happens when the contractor whose bid was selected evades signing the contract or fails to provide a performance bond. Retention is also a risk if documents are not supplemented upon request, provided this prevents the selection of the bid. This often comes as a surprise to companies that submitted a bid "on a trial basis" — withdrawing from a win has a price.

Refund

The contracting authority returns the bid bond immediately after selecting the most advantageous bid or cancelling the proceeding — with the exception of the contractor whose bid was selected; they recover it after signing the contract. In the case of guarantees, the return consists of releasing the obligation, which is worth notifying the guarantor about so as not to pay commissions longer than necessary.