What is EMD in a tender?

EMD is not the price of the goods and it is not a line on the purchase order. It is a deposit, held while the bid is open, and returned to the bidders who do not win — on the timetable the tender and the rules set. The lowest evaluated price is still the L1 bidder. EMD does not make a bid technically qualified.

EMD full form

EMD stands for earnest money deposit. In the General Financial Rules, 2017, the same thing is called bid security, “also known as earnest money”. Buyers and vendors will see both phrases on the same tender. A bid securing declaration is a different instrument: a signed statement instead of money. Performance security is later still, after the contract is awarded.

How much is asked for

Rule 170(i) of the General Financial Rules, 2017, as compiled by the Department of Expenditure, says the amount of bid security should ordinarily range between two percent and five percent of the estimated value of the goods to be procured. The ministry or department decides the figure and writes it in the bidding documents. There is no single percentage that every tender in India uses. Micro and small enterprises, firms registered with the Central Purchase Organisation or the ministry concerned, and startups recognised by DPIIT are named in that rule as bidders from whom bid security is not taken. Confirm that exemption list against the latest compilation and the tender you are reading. A Department of Expenditure office memorandum of 12 November 2020 also dealt with bid security; a government buyer follows the instruction that applies to them now, not a summary.

Illustration, not a rate you can copy. A buyer estimates a supply at ₹10,00,000 and the tender sets bid security at 2 percent, the bottom of that ordinary range. EMD is ₹20,000. If the same tender had said 5 percent, EMD would be ₹50,000. The tender’s sentence is the number. GST is not added on top: the deposit is not the taxable value of the supply.

EMD, bid securing declaration and performance security

When EMD is forfeited

The bidding documents state the forfeiture. The events Rule 170(iii) lists for a declaration are the ones tenders usually write for cash EMD as well: withdrawing or modifying the bid during validity, and, after award, failing to sign the contract or to submit performance security. If the L1 bidder withdraws, a government tender that said so can forfeit that bidder’s EMD and may offer the quantity to L2 only on the terms already published. A private RFQ that never mentioned forfeiture does not grow a forfeiture after the fact. You re-tender, or you negotiate on the record.

When it is refunded

The compiled Rule 170 says bid securities of unsuccessful bidders should be returned at the earliest after the final bid validity expires, and in any case by the 30th day after the contract is awarded. In a two-stage evaluation, bidders who fail the first stage are to be refunded within 30 days of that stage’s result. The successful bidder’s EMD is dealt with as the tender says, often adjusted against performance security or returned once that security is in. Read the current Department of Expenditure compilation and the tender before you promise a vendor a date. GeM does not replace that reading.

GeM, private RFQs and reverse auctions

On the Government e-Marketplace the bid document decides. Some bids ask for earnest money. Many ask only for a bid securing declaration that points at Rule 170(iii). There is no GeM-wide percentage to memorise. Open the bid.

A private company is not under the GFR. Ask for EMD when a withdrawn winner would force you to re-run an expensive buy, and write the amount, the form (transfer, guarantee) and the forfeiture in the RFQ before anyone prices. If your suppliers are small, a one-paragraph declaration is often enough and does not lock up their cash. In a reverse auction the same choice applies: the rules of the event are the rules, and they have to be on the invitation, not in a phone call after L1 goes quiet.