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During the tender in estimation and costing, the guarantee of the tenderer to deposit the required security and enter in to the required agreement on intimation of the acceptance of his tender is called ________.
deposit money
valid money
earned money
earnest money
earnest money
Earnest Money Deposit (EMD) is a financial guarantee provided by a tenderer to the project owner to ensure their commitment to the bid. It serves as evidence of the bidder's seriousness and provides security to the owner if the successful bidder fails to execute the agreement or furnish the performance security after the acceptance of their tender.
CPWD Manual, Clause 16.2.1
Earnest Money Deposit (EMD) is a financial guarantee provided by a tenderer to the project owner to ensure their commitment to the bid. It serves as evidence of the bidder's seriousness and provides security to the owner if the successful bidder fails to execute the agreement or furnish the performance security after the acceptance of their tender.
EMD=Bid┬аValue├ЧRate% (Typically 1% to 3% of the estimated cost)
The principle involves creating a monetary barrier to discourage non-serious or speculative bidding. If the tenderer withdraws their offer before the validity period expires or refuses to sign the contract upon award, the earnest money is forfeited by the department. For successful bidders, it is often adjusted against the Security Deposit or refunded upon the execution of the contract.
EMD is mandatory for all competitive tenders to filter out non-serious bidders.
It is usually submitted in the form of a Demand Draft, Bank Guarantee, or Fixed Deposit Receipt.
The amount is refunded to unsuccessful tenderers immediately after the award of the contract.
Failure to sign the agreement results in the forfeiture of the EMD.
Prevents frivolous bidding
Secures the interests of the owner against withdrawal of offers
Verifies the financial credibility of the contractor
Blocks liquidity for small-scale contractors
Requires administrative overhead for refund processing
Public works procurement
Government construction contracts
Supply and procurement tenders
Option A (deposit money) is a generic term; Option C (earned money) is technically incorrect as 'earning' relates to profit, not a security bond.
Security Deposit is different from EMD; while EMD is deposited during bidding, Security Deposit is required after the award to guarantee performance during the execution phase.
D is correct тАФ Earnest money is the financial guarantee submitted by tenderers to ensure they accept the contract if their bid is successful.
Remember the sequence: Earnest Money (during bidding) comes before the Security Deposit (during contract execution).
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