Key concept
Performance Security & Bank Guarantee
In short
Performance security is a guarantee the winning bidder furnishes after award to ensure they complete the contract. It's commonly 3% of the contract value (historically 5–10%).
- Most often furnished as a bank guarantee (BG), but FDRs and online deposits are also accepted.
- Released after the work is completed and the defect-liability period ends.
- Forfeited if you fail to perform — different from EMD, which is paid with the bid.
Where EMD proves you're a serious bidder, performance security proves you'll deliver. It's the guarantee the department holds for the life of the contract.
How much is it?
The exact figure is in the contract, but typically:
| Item | Typical value |
|---|---|
| Performance security | ~3% of contract value (some tenders 5–10%) |
| Performance Bank Guarantee (PBG) | Same amount, in BG form |
| Retention money | Deducted from each running bill (where applicable) |
What form does it take?
- Bank Guarantee (BG) — the most common; a scheduled bank guarantees the amount to the department.
- Fixed Deposit Receipt (FDR) pledged to the buyer.
- Online deposit / DD for smaller contracts.
- Surety bond — increasingly accepted, low-collateral (see our surety bond guide).
When is it released — or forfeited?
↩️
Released
After completion + the defect-liability period
🛡️
Held
For the full contract + warranty period
✕
Forfeited
If you abandon or breach the contract
EMD vs performance security vs retention
| When | Purpose | |
|---|---|---|
| EMD | With the bid | Good-faith bid security (~2%) |
| Performance security | After winning, before signing | Guarantees completion (~3%) |
| Retention money | Deducted from bills | Covers defects during execution |
What is a Bank Guarantee (BG)?
A BG is a written promise by your bank to pay the department a fixed amount if you fail to meet your obligations. The bank charges a fee and usually holds margin/collateral. Keep your BG valid for the full required period plus a claim buffer — an expired BG is treated as no security.
Plan your BG earlyArranging a bank guarantee takes time and ties up margin money. Line it up as soon as you receive the Letter of Award so you don't miss the signing deadline.
Find tenders to bid on
2,00,000+ live tenders across 30+ portals — filter by sector, state and value, free.
Frequently asked questions
What is performance security in a tender?
A guarantee the winning bidder furnishes after award (commonly ~3% of contract value) to ensure they complete the contract. It is released after completion and the defect-liability period, and forfeited on default.
How much is performance security?
Usually around 3% of the contract value, though some tenders ask 5–10%. The exact figure is stated in the contract/tender document.
What is the difference between EMD and performance security?
EMD is paid with the bid as good-faith bid security (~2%). Performance security is furnished after winning, before signing, to guarantee completion (~3%).
What is a Performance Bank Guarantee (PBG)?
Performance security furnished in the form of a bank guarantee — a scheduled bank guarantees the amount to the department for the contract period.
When is performance security released?
After the work is satisfactorily completed and the defect-liability/warranty period ends. It is forfeited if the contractor abandons or breaches the contract.