Winning is not the finish line. Before the contract starts, a Gujarat authority almost always asks the successful bidder for performance security: money or a bank guarantee that guarantees you will complete the work as agreed. On GeM and many state tenders this is furnished as an ePBG, an electronic Performance Bank Guarantee.
Bidders who ignore performance security during pricing get an unpleasant surprise after award, because it locks up capital and carries bank charges. Factor it in before you quote. Here is how it works.
What performance security is
Performance security, sometimes called a performance guarantee, is furnished by the winning bidder after the tender is awarded and before or at the time of signing the contract. It protects the authority if you fail to perform, allowing them to recover loss from it.
It is different from EMD. EMD guarantees your bid; performance security guarantees your delivery. EMD is usually refunded once you furnish performance security, so the two do not stack forever, but for a while you may have both tied up.
How much and what form
On GeM, performance security is fixed by the buyer at 3% to 5% of the contract value, under GeM's General Terms and Conditions. You must furnish it within 15 days of the contract award, and it needs to stay valid for 2 months beyond your contract obligations, including any warranty period. Direct Purchase and L-1 awards under GFR Rule 149(i)-(ii) are commonly exempt from performance security altogether, so check your specific contract before assuming you need one. On nProcure and other state tenders, the exact figure and format are in the tender document, so use that rather than a rule of thumb.
Acceptable forms typically include a bank guarantee, a fixed deposit receipt, or an online deposit, in favour of the tendering authority. On GeM and many Gujarat state tenders it is submitted electronically as an ePBG, where your bank issues the guarantee and it is verified digitally. The guarantee must stay valid for the full contract period plus any warranty or defect-liability window the tender requires.
ePBG in practice
An ePBG is a bank guarantee issued and transmitted electronically, which the buyer can verify against the bank rather than handling a paper instrument. It reduces forgery risk and speeds verification, which is why GeM pushes it.
To arrange one, your bank issues the guarantee for the required amount, validity and beneficiary, and sends it through the electronic channel the portal accepts. Give your bank enough lead time; arranging a guarantee for a large contract is not same-day work, and a delay in furnishing performance security can cost you the award and your EMD.
Release and forfeiture
Performance security is released after you complete the contract satisfactorily and any defect-liability or warranty period ends. Until then the authority holds it, and its validity must not lapse; if it is about to expire mid-contract, you extend it.
If you fail to perform, the authority can invoke it and recover its loss. That is the whole point. Price your bid so the cost of blocking this capital and paying bank charges is built in, not discovered after you have already committed to a thin margin.
Frequently asked questions
What is the difference between EMD and performance security?
EMD is a smaller deposit that guarantees your bid before award. Performance security is furnished after you win and guarantees you complete the work. EMD is usually refunded once performance security is in place.
What is an ePBG?
An electronic Performance Bank Guarantee: a bank guarantee issued and verified digitally rather than on paper. GeM and many Gujarat state tenders accept performance security in this form. See the dedicated ePBG full form guide for the electronic mechanics.
When do I get performance security back?
After you complete the contract satisfactorily and any warranty or defect-liability period ends. On GeM it is refunded within 30 days of that completion being confirmed. Keep the guarantee valid throughout, and extend it if it would otherwise expire during the contract.
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