Benefit Industry & Business -Reduction in Security Deposits for Govt. contracts– Dept.Of Exp. MOF.
The Procurement Policy Diivision of GOI –MOF Dept.Of Expenditure has eased out the condition of mandatory security deposits in Governmental Contracts. Now applicable is a deposit of only 3 % as Security Deposit as reduced from existing 5-10% which is taken as ‘Performance Security’
The Entrepreneurs who bid successfully and later have to execute contracts in time bound manner with various Govt. departments stand to benefit by easing of liquidity crunch in their hands.
This step effectively gives wider competitively fairness to participate in the tender bidding process for securing supply contracts. Also these contacts may be of any kind like Goods, Consultancy, Works, Non-Cconsulting Services etc. etc.
Further, the reduced rate will also be for all tenders and contracts issued or to be concluded till 31.12.2021 and even beyond this date there will be no subsequent increase of Performance Security.
However, this relaxation is not available in the contracts under dispute wherein arbitration or court proceedings have already started or are being started .
Performance Security by way of deposits in excess of 3% as stipulated above, can be done only with the approval of the next higher authority in the process of finalizing that particular tender if the situation demands higher security.
Simplified explanation of Circular No. F.9/4/2020-PPD 12th Nov 2020. of MOF
3 comments
The reduction in security deposit as “Performance Security” is step towards enhancing liquidity with contractors.
It is part of liquidity boosting measures initiated by GoI after outbreak of current pandemic.
Very correct,Sir.
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