What is EMD in a tender? Earnest money, exemptions and refunds

1. What EMD is for

A buyer that runs a tender spends time and money evaluating bids. If the chosen bidder walks away, the buyer has to start again. The EMD covers that risk. You lodge it with your bid, and you get it back if you keep your word.

Tender documents also call it earnest money or bid security. It is often confused with two other payments, so keep them apart:

• EMD is lodged with the bid and is refundable.
• Tender fee is a charge for the document or for processing the bid. It is usually not refunded, and many buyers do not charge one.
• Performance security is given only by the winner, after the award, to secure the contract. On GeM it is the ePBG. It has its own amount and duration.

2. What the bid document tells you

On GeM the amount appears as EMD Amount on the bid. On the Central Public Procurement Portal and state portals it is on the tender details page and in the tender document. The notice is only a summary, so read the full terms and note:

• The amount.
• The forms of payment the buyer accepts.
• Who the payment is made out to, and where a paper instrument must be sent.
• The deadline, and whether it is for paying or for the buyer receiving it.
• How long a guarantee or deposit must stay valid.
• Who is exempt, and what proof they must attach.
• When and how it is refunded.

A corrigendum can change any of these. Check the bid again before you pay.

3. Paying it without last-minute trouble

Buyers usually accept some of these: an online transfer, a demand draft, a fixed deposit receipt pledged to the buyer, or a bank guarantee. Some also accept an insurance surety bond. The bid document says which forms it accepts.

• A bank guarantee or a fixed deposit takes days. Ask your bank as soon as you decide to bid.
• Use the bid document's format for a bank guarantee, word for word. A guarantee in the bank's own format may not be accepted.
• Check the validity date printed on the instrument. It must cover the whole period the bid document asks for, which is usually longer than the bid validity.
• Write the beneficiary's name exactly as the bid document gives it.
• For an online payment, pay well before the deadline and keep the receipt and transaction reference with the bid file.

4. Who may be exempt

Government procurement rules relieve some bidders of the EMD. The ones you will meet most often are:

• Micro and small enterprises registered on Udyam, under the Public Procurement Policy for Micro and Small Enterprises Order 2012. Medium enterprises are not covered by that order.
• DPIIT-recognised startups, on the conditions set in the Ministry of Finance's procurement rules.
• Other bidders that the buyer's own rules name, such as some government bodies.

An exemption is a claim you make, not something the portal gives you. It works only when:

1. The bid document offers it. State and local buyers follow their own rules.
2. You attach the certificate the bid names, such as the Udyam certificate or the startup recognition certificate.
3. The certificate is valid and covers what is being bought.
4. You claim it in the way the portal or the form asks.

The guide on MSE benefits in government tenders covers what else an MSE can claim.

5. The bid securing declaration

Some bid documents ask for a bid securing declaration instead of an EMD. You sign a statement that if you withdraw during the bid validity, or refuse the contract after winning, you can be suspended from bidding for a period the document states.

It costs nothing to sign, but it is the same promise in a different form. Losing the right to bid can hurt more than losing a deposit. Sign it only if you are ready to hold your price for the whole bid validity.

6. When the buyer keeps it

The bid document lists the grounds. The common ones are:

• You withdraw or change your bid during the bid validity.
• You are selected but do not sign the contract or accept the order.
• You are selected but do not give the performance security in time.
• Your bid contains false information or documents.

The way to avoid this is simple, if not easy: check your price before you submit, make sure you can supply on the stated terms, and know the bid validity. A mistake found after the bids are opened is usually too late to fix without risk to the EMD.

7. Getting it back

Bidders who are not selected usually get the EMD back after the contract is awarded or the bid validity ends. The selected bidder's EMD is usually returned, or adjusted, once the performance security is in place. The bid document says which, and when.

• Keep your bank details on the portal correct, because refunds go to the account on record.
• Keep the bid number, the receipt or instrument details and the result together.
• If you gave a bank guarantee or deposit receipt, ask for it back in writing, and ask your bank to close the guarantee once you have it.
• If the refund is late, write to the buyer with the bid number and payment details, and keep a copy.

Where Tenderlytix fits

The free tender check lists the EMD it finds in a tender PDF you upload. In the workspace it also shows the line the EMD amount and any exemption condition were read from, and says Not confirmed when the tender does not state them. Tenderlytix does not pay, lodge or track an EMD, so check the amount and terms against the bid document. For the rest of a GeM bid, see how to read a GeM bid document.