Bid security explained

What it is for

A bid security, also called a tender security, protects the procuring entity if a bidder withdraws its bid during the validity period or refuses to sign the contract after winning. If neither happens, it is released after the process ends.

The tender document says whether a security is required, how much, in what form, and how long it must remain valid. Under Kenyan public procurement law the amount is capped at a small percentage of the estimated value of the tender; the tender document states the exact figure.

The usual forms

• A bank guarantee from a bank licensed in Kenya
• An insurance bond from an insurer the tender accepts (check whether the tender lists acceptable insurers or requires approval)
• Other forms only where the tender allows them

Tender securing declaration

Some tenders ask instead for a tender securing declaration: a signed undertaking, on the tender's own form, that the bidder accepts being barred from public tenders for a period if it withdraws or refuses to sign. Some tenders reserved for AGPO groups use this instead of a cash or bank security. Use exactly the form the tender provides, and check the current rules for when it applies.

Mistakes that cost bids

• The amount is below what the tender states
• The validity is shorter than the tender asks for (often the bid validity period plus an extra margin)
• The guarantee names the wrong procuring entity, tender number or bidder
• The wording departs from the tender's template where a template is given
• The security comes from an issuer the tender does not accept
• The original is not in the envelope, or not uploaded where the submission is electronic

Plan for the time it takes

Banks and insurers need documents and time to issue a security, and usually charge a fee or premium and may ask for collateral. Request it as soon as you decide to bid, and check the draft wording before it is issued.