Earnest Money Deposit or EMD is the sum of money deposited or paid by a potential bidder or contractor to the TIA (tender issuing authority) to show their genuine interest to participate in a tender. EMD is submitted along with the bid documents, and it generally amounts to 2-5% of the total value of the contract. The EMD refund process typically starts after the tendering process is complete. Unsuccessful bidders get an EMD refund and, for the winner of the contract, the EMD refund amount is typically adjusted against from the final payment.
EMD vs Tender Fee: Understand the Difference
Both the tender fee and EMD payment are typically mandatory for the opening and processing of a bid document. A tender fee is the administrative cost and is charged for the effort required for evaluation of documents during the bidding process. EMD, on the other hand, as mentioned above, is a token of serious intention by the bidding company while contending for a project. Unlike the tender fee, which is non-refundable, an EMD refund is issued by the purchasing party to the vendor.
EMD vs Tender Security Deposit: Do Not Mix Them Up!
Tender Security Deposit is the deposit paid by the winner of a bid to the tender issuing authority (TIA), after the bidding process is over and before the project work begins. Usually, a tender security deposit amounts to 10% of the total value of the contract. Tender security deposit is a refundable amount which is refunded after the completion of the project. Depending on the project, it may also be refunded once the defects liability period gets over. The tender security deposit is not refunded if the conditions mentioned in the contract are not addressed or fulfilled.
How Does the EMD Refund Process Work?
The EMD refund process is simple. Once the bid process gets over, the EMD refund is issued to all the bidders by various means –
- Net Banking – If the EMD was paid through net banking, the EMD refund will be processed back to the bidder’s designated bank account.
- Demand Draft – If the amount was paid via demand draft, the bidder can collect the EMD refund from the bank from where the draft was issued.
- Bank Guarantee – In case it was provided as a bank guarantee, the EMD refund will be issued to the bidder by the bank.
Terms and Conditions for an EMD Refund
- EMD is refunded to all unsuccessful bidders. The only condition is that they do not violate any terms and conditions while the procurement process is on.
- Vendors can ask for a refund if they withdraw their bids before the deadline.
- EMD is not refunded to the winner of a contract if they fail to complete the deal.
- An EMD refund is issued to all the participants or bidders, if the tender issuing authority (TIA) cancels the process for some reason.
- If the bidder makes an amendment to the offer after a project is awarded to them, the EMD refund process will stand cancelled.
EMD, Tender Security Deposit & Tender Fee: Debunking the Confusion
| Feature | EMD | Tender Security Deposit | Tender Fee |
| Purpose | EMD is charged to ensure that there are no fake bidders or swindlers participating. | Tender security deposit guarantees performance by the company after winning a contract. | The tender fee is charged to cover administrative costs during the procurement process. |
| When to pay | Along with the bid submission | After winning a contract, before the project commences. | Along with the bid document submissions. |
| Refund | In general, EMD Refund is issued to unsuccessful bidders | Refunded after project completion | Not refunded |
| Who pays it | Every bidder/participant | Winner of the contract | Generally, all bidders. |
| How much to pay | A certain percentage of the estimated value or reserve price | A fixed percentage of the contract value | A fixed amount that is generally pre-decided. |
BidAssist: Save Your Money with Smart Tendering
Most often than not, we come across companies investing in a tender that doesn’t align with their profile and capabilities. You not only end up wasting your time, energy and manpower by selecting a wrong tender, but also end up losing money in the form of tender fee and EMD, though EMD refund gets issued eventually. The EMD refund process sometimes may go awry adding to your woes. To avoid this, our dedicated team at BidAssist helps you in smart tendering by identifying only the relevant opportunities for your business so that you stand a better chance at winning a desired tender.
Why Choose BidAssist?
BidAssist has more than 44 mn tenders in its database sourced from more than 50000 sources globally. It has the largest database in India and is gearing to be the largest global player soon. BidAssist’s content database is more than double of other leading tender aggregate platforms. Moreover, our experienced team helps you understand complex tender documents better and assists you in navigating the procurement process effectively. Avail timely support and expert advice to optimise your bidding strategy and save your precious time!
Frequently Asked Questions
- How long does the EMD refund process take?
EMD refund process takes no later than 30 days after the contract is awarded.
- Is an EMD refund issued to the winner as well?
EMD refund is issued to all the unsuccessful bidders, alongside the winner, once they sign the contract and pay the performance guarantee. The EMD amount is usually adjusted against the final sale price or security deposit for the winner.
- How does a tender fee differ from an EMD?
A tender fee is charged for the evaluation of documents during the bidding process. The tender fee charges are non-negotiable and non-refundable.
- Is EMD compulsory?
Yes, by and large, especially for government tenders, submitting an EMD is mandatory for a company to be eligible to bid.
- What happens if the winner fails to complete the transaction after the tender results are announced?
If the winner decides to withdraw or fails to pay the remaining balance within the stipulated time, the EMD is usually forfeited.
- Which businesses are exempted by the government from paying an EMD?
In government procurements, MSMEs (Micro, Small and Medium enterprises) are often exempted from submitting an EMD.