How bid costs add up
Bidding on a public tender costs money whether or not you win. Some costs are fixed for each bid: the tender document fee, any portal or registration charges, and in India a Class III digital signature certificate to sign and submit on e-procurement portals. The largest cost is often the least visible: the time your team spends reading the tender, pricing it, collecting certificates and writing the technical proposal. Then there is the money you must put up as security, first to bid and then to perform.
EMD vs performance security
Earnest money (EMD), or bid security, protects the buyer if a bidder withdraws or refuses the award. It is usually a few per cent of the estimated value, or a fixed sum, and is returned once the contract is awarded. Performance security is asked only of the winner, as a percentage of the contract value, and is commonly held until the contract, including any warranty period, is complete. 5% is a common figure in Indian central government contracts and 10% in many other countries, but the tender document sets the actual amount and term.
Bank guarantee vs cash
Paying security in cash, by demand draft or online costs nothing directly, but the money is out of your business until it is refunded. A bank guarantee keeps the cash in hand, but the bank charges a commission for the full period, may want a margin deposit, and each guarantee uses up part of your credit limit. For a long performance guarantee, the commission can be a real share of your margin; the calculator shows how much.
MSE and startup exemptions in India
Under GFR 2017 Rule 170, central government buyers commonly exempt registered Micro and Small Enterprises from bid security, and DPIIT-recognised startups are often exempt as well. Many tenders now accept a Bid Securing Declaration, a signed undertaking that you may be barred from bidding for a period if you withdraw, in place of EMD. Tender fee waivers for MSEs are also common. These rules are not universal: states, PSUs and individual tenders can differ, and an exemption may cover only some items. Read the eligibility clause in each tender before you rely on it.
When a bid is worth it
Compare the effective cost per win with the margin you expect on the contract. If your bidding costs per win are close to your margin, you are working for the buyer at cost. Bid where you clearly meet the eligibility criteria, where your past wins suggest a realistic chance, and where the guarantee terms fit your bank limits. Reusing documents, certificates and a valid DSC across bids brings the cost of each bid down.
Frequently asked questions
Is the EMD a cost of bidding?▾
Not usually. An EMD paid in cash, by demand draft or online is normally refunded to unsuccessful bidders after the award, and to the winner once the performance security is in place. Its real cost is the cash being locked up for the months the tender takes. It can be forfeited, for example if you withdraw your bid during its validity or refuse an award.
How much does a bank guarantee cost?▾
Banks charge a commission on the guaranteed amount, usually quoted as a percentage per year and charged for the full period of the guarantee. The rate depends on your bank and your credit standing, and some banks also ask for a cash margin or collateral. Ask your bank for its current rate and enter it in the calculator.
Are MSEs exempt from EMD in India?▾
Commonly, yes, on central government tenders: GFR 2017 Rule 170 says bid security is not required from registered Micro and Small Enterprises, and DPIIT-recognised startups are often exempted too. Many buyers also accept a Bid Securing Declaration instead of EMD. The exemption can be limited to certain items or tenders, and state governments and PSUs set their own rules, so check each tender document.
Why does the calculator ask for a win rate?▾
Because the bids you lose cost money too. If bidding costs 1% of the contract value and you win one bid in five, the bidding cost behind each contract you win is about 5% of its value. Comparing that figure with your expected margin is a quick way to see whether a type of tender is worth pursuing.
Does the calculator convert currencies?▾
No. The currency selector only changes the symbol and number format. Enter every amount in the same currency as the tender.