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Performance Security @ 3% of Value of Contract : Extended till 31.03.2023.

Performance Security

Government of India, Ministry of Finance, Department of Expenditure Procurement Policy Division New Delhi issued a office Memorandum regarding the Extension of Validity period of performance Security money @3% of total Value of the Contract.

During the Covid The Government of India reduce the percentage of Performance Security money from 5-10% to 3% till 31.12.2021 as per office memorandum dated 12.11.2020. and now this period has been extended till 31.03.2023


Click Here for More details and complete Circular in pdf.

As per Rule 171 of General Financial Rules (GFRs) 2017, Performance Security is to be obtained from the successful bidder awarded the contract for an amount of five to ten percent of the value of the contract to ensure due performance of the contract. Similar provisions also exist in the Manual for Procurement of Works 2019 and Manual for Procurement of Consultancy & other Services 2017 issued by this Department.

2. The Government is in recelpt of many representations that on account of slowdown in economy due to the pandemic, there is acute financial crunch among many commercial entities and contractors, which in turn is affecting timely execution of the contracts. It has also been represented that this may affect the ability of contractors to bid in tenders and hence reduce competition. Requests are being received for reduction in quantum of Security Deposits in the Government contracts.

3. In view of all above, it is decided to reduce Performance Security from existing 5-10% to 3% of the value of the contract for all existing contracts.

However, the benefit of the reduced Performance Security will not be given in the contracts under dispute wherein arbitration/ court proceedings have been already started or are contemplated.

4. Further, all tenders/ contracts issued/ concluded till 31.12.2021 should also have the provision of reduced Performance Security.

5. In all contracts where Performance Security has been reduced to 3% in view of above stipulations, the reduced percentage of Performance Security shall continue for the entire duration of the contract and there should be no subsequent increase of Performance Security even beyond 31.12.2021.

Similarly, in all contracts entered into with the reduced percentage of Performance Security of 3%, there will be no subsequent increase in Performance Security even beyond 31.12.2021 & Extended till 31.03.2023 as per OM dated 30.12.2021.

Click Here for More details and complete Circular in pdf.
Click Here for More details and complete Circular in pdf.

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