Bid Security

Bid security (also called earnest money) is a sum of money — usually 2% to 5% of the estimated bid value — that a bidder submits alongside their tender bid, either as a bank guarantee, pay order, or demand draft in favour of the procuring agency.

Its purpose is to protect the procuring agency against a bidder withdrawing or modifying their bid after the submission deadline, or refusing to sign the contract if awarded. If a bidder withdraws improperly, the bid security is forfeited. Unsuccessful bidders normally have their bid security returned after the contract is awarded to the successful bidder; the winning bidder's bid security is typically released once they submit a performance guarantee.

PPRA Rule 26 and equivalent provincial rules require procuring agencies to specify the bid security amount and form in the bidding documents — bids submitted without the required bid security are usually rejected as non-responsive.