Thursday, February 26, 2009

All about Money

# Document Fees - Detailed commercial & technical specification of each tender is available in Tender Document, which most government departments sell for a small fee. Tender Document Fees is the fee towards buying the Tender Document. The reason towards making Tender Document paid are many;
- To ensure that only Serious Bidders bid
- To recover the cost of making Tender Document
- To recover the cost of Tender Advertisement
- To recover the cost of efforts involved in tendering process
Please Visit http://www.tendertiger.com to view 1 Million Tenders

# EMD or Earnest Money Deposit - To ensure that a Bidder does not submit a Dummy Bid or back out at time of tender opening, Government Department collects a small refundable fee from each bidder, which is called EMD. EMD is always in form of a Demand Draft & cheques or cash are strictly not allowed. EMD is returned when all Bids are opened & tender is awarded. In case Tender is cancelled, the EMD is returned. Most of the time the EMD is not credited into Government Bank but is kept with Buyers in as it is form. After Tender opening the same is returned.
Some Government departments however deposit the EMD into their Bank and enjoy the Interest. Some departments which are not cash rich even go to the extent of using bidders money and poor bidder actually have to bribe accountants to get their EMD back.

After Bid is opened, if a Bidders refuses to take the contract, than his EMD is forfeited. EMD is generally less than 5% of the Tender Value.
Please Visit http://www.tendertiger.com to view 1 Million Tenders

# Bank Guarantee or BG - In High Value tenders the EMD can be as high as Crores of rupees. In such Tenders Bidders will not want to make a DD of the same and give it to Government because there will be huge interest loss till the time EMD is not returned. Hence in all such Tenders instead of EMD, Bank Guarantee is also allowed.

In case of Bank Guarantee, the Bank Issues a letter to Government a sort of undertaking that if Bidder Defaults, Bank will pay amount equivalent to Bank Guarantee amount. The Government purpose is solved, because if Bidder defaults, it will get the Money from Bank. In most of the cases, BG is allowed from only Nationalised Bank i.e. BOB, SBI, etc. Some Buyers also allowed Private Banks like ICICI, Citibank, etc.

To get a Bank Guarantee, the Bidder has to do the following
Option 1: Make an Fixed Deposit (FD) of amount equivalent to Bank Guarantee amount in the Bank & Bank in lieu of FD gives the Bank Guarantee. This way Bidders get Interest on his FD & on paying a small fee (up to 1-2%) he can get a Bank Guarantee. If bank gives 9% interest on FD & he is giving bank 1% interest on BG, Bidder get a net net 8% interest. If Bidder had given an EMD, he would have lost this 8% interest.

Option 2: Bidder can pledge collateral's like House, Offices, Machinery's, Raw Materials, etc. instead of Cash and still get a Bank Guarantee. Bank on the basis of valuation of his Collateral can issue Bank Guarantee.
For e.g. if a company has a turnover of 10 Cr, than Bank can issue it a Bank Guarantee of 1 Cr, if company makes FD of just 20 Lakh, because a company which is making 10 Cr turnover can anytime pay Rs.1 Cr to bank, if it defaults.
Please Visit http://www.tendertiger.com to view 1 Million Tenders

Security Deposit - Once it is decided that a Tender is awarded to a Bidder, he has to deposit a Security Deposit with the Buyers such that if he does not complete the task as per the work order, the Buyer can recover the loss by forfeitting his Security Deposit.
e.g. If a Bidders gets Rs.10 Cr contract to construct a Bridge withing 12 months , than he has to deposit a Security deposit of 10% i.e. 1 Cr with Buyers. Now if he does not complete the bridge on time or leaves it incomplete, the Government can forfeit his 1 Cr as penalty.

Security Deposit can be in form of EMD, Bank Guarantee, National Saving certificates, Cash, etc. Only when the Winning Bidders makes the Security Deposit, he gets his EMD Back.
Please Visit http://www.tendertiger.com to view 1 Million Tenders

34 comments:

  1. i love to visit this type of post .I really enjoy to visit this your post.I read your article its very nice to read i have early waiting for your post.


    commodities

    ReplyDelete
  2. this message useful for me to know about tender
    k.murugan

    ReplyDelete
  3. These message useful for me to know about Document fee/EMD/BG/SD, nice to read

    Pankaj

    ReplyDelete
  4. Great thoughts you got there, believe I may possibly try just some of it throughout my daily life.

    L&t Contractors

    ReplyDelete
  5. Really helpful site, I'd love to subscribe your updates..
    Thanks a lot.
    -Khalid

    ReplyDelete
  6. IT WAS SERIOUSLY NYC I CAME TO KNOW ABT MANY THINGS LIKE BG, EMD AND ALL

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  7. Successful bidder get back EMD after completion of work or not ?

    ReplyDelete
    Replies
    1. Yes Successful Bidder gets back EMD either after completion of work or after acceptance of work order with security deposit if any as per terms in your tender.

      Delete
  8. Pretty good post. I just stumbled upon your blog and wanted to say that I have really enjoyed reading your blog posts. Any way I'll be subscribing to your feed and I hope you post again soon.

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  9. Thanks for taking the time to discuss this, would you mind updating your blog with more information? It is extremely helpful for me.

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  10. I recently came across your article and have been reading along. I want to express my admiration of your writing skill and ability to make readers read from the beginning to the end. I would like to read newer posts and to share my thoughts with you.

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  11. wanted to understand the full procedure of how tender works from the point of view of the person inviting for tender. what all statutory things he has to comply with.

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  12. a good post,details about the EMD n the security deposit is good.

    ReplyDelete
  13. Articles and content in this section of the website are really amazing. Great ideas indeed! I will surely keep these in my mind!
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  14. Really it's very much useful site

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  16. Is the emd returned to the bidder who does not get the contract?

    ReplyDelete
    Replies
    1. EMD is always returnable. Generally EMD of those vendors/bidders who do not qualify for getting the contract/order is to be released once the L1 (lowest bidder / successful vendor for getting the contract) is decided. And EMD of the successful bidder is released after the acceptance of work order by him with security deposit if any.

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  17. Described very clearly . Thank you. I used to do such tendering process and purchasing in my office But these terms(EMD/BG/Call deposit etc.) was not as much clear as now. Thank you once again.

    ReplyDelete
  18. In some project , profit is 30-40% after 4 years , they said this is good profit , but if they put money on fd .. they can get easily 36% profit in 4 years .. i am confused .. because i think all is they need to invest first , government gives money after completion of project ..

    ReplyDelete
  19. Its was too helpful outstanding job by Google thank you so much

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