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Money | Glossary

Performance Security / Performance Bank Guarantee (PBG)

Security the winning bidder furnishes after award, usually a bank guarantee, to cover proper performance of the contract. It is returned after the contract, including any warranty or defect liability period, is complete.

What it covers and how much it is

Performance security protects the buyer if the contractor does not perform. GFR 2017 sets it at 5 to 10% of the contract value for central procurement; the Ministry of Finance has at times reduced it (to 3% during 2020 to 2023), and states and PSUs set their own figures. GeM bids call it ePBG and state the percentage in the bid document.

It is normally submitted within a fixed number of days of the letter of acceptance (often 14 to 30) as a bank guarantee, fixed deposit receipt or online payment, and must stay valid until 60 days after all contractual obligations, including warranty, are over.

Before you bid

A bank guarantee uses up part of your credit limit with your bank for the life of the contract. Check the percentage and validity in the tender before you bid, and confirm your bank can issue the guarantee in time; failing to furnish it forfeits your EMD.

Frequently Asked Questions

Is performance security the same as security deposit?
Not always. Many works contracts take a performance guarantee at award and also deduct a security deposit (retention) from each running bill. The tender's conditions of contract say which apply and when each is released.
What happens if I win but cannot give the PBG?
The award can be cancelled and the EMD forfeited, and some buyers also suspend the bidder from their future tenders. Line up the bank guarantee before you bid.
Where is the ePBG percentage on a GeM bid?
In the bid document, under ePBG detail. Tender pages here show it under eligibility when it has been read from the bid document.

Related Terms

EMD (Earnest Money Deposit)

The bid security a bidder deposits with the bid. It is returned to unsuccessful bidders and forfeited if a bidder withdraws during bid validity or, after winning, does not sign the contract or furnish performance security.

L1 (Lowest bidder)

The technically qualified bidder with the lowest evaluated price. Most government works and supply contracts are awarded to L1.

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