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Performance Guarantee for MP PWD Contracts

Three separate amounts get confused constantly: EMD, performance guarantee and security deposit. They are taken at different times, for different reasons, and released on different dates.

Three different amounts, three different purposes

WhenWhat it is for
EMD (earnest money)With the bidThat you will honour your bid if you win. Returned to unsuccessful bidders after the tender
Performance guaranteeAfter award, before the agreementThat you will complete the work as contracted. Usually a bank guarantee for a percentage of the contract value
Security depositDeducted from running billsCover for defects and outstanding obligations, released after the defect liability period

Contractors routinely treat these as one pot of money. They are not, and confusing them causes real cash flow problems — particularly on the assumption that the performance guarantee returns at handover, when the security deposit is what continues past it.

Written 5 September 2026. Government requirements and portal behaviour change — message us to confirm before you rely on any date or figure here.

What to get right on the bank guarantee

  • The exact format the department requires. Departments reject guarantees that deviate from their prescribed wording, and a rejected guarantee delays the agreement.
  • The validity period. It has to cover the contract and usually a claim period beyond it. A guarantee expiring before the work completes has to be extended, and banks charge for that.
  • The amount, calculated correctly on the contract value the department is using rather than your own figure.
  • Bank charges and margin. The bank will usually require margin money or a lien on a deposit. That is your working capital tied up for the duration — factor it into the price before you bid, not after you win.
  • A diary entry for expiry. An expired guarantee on a live contract is a default in itself.

Getting it back

Release is not automatic. The department discharges the guarantee once its conditions are satisfied, and the contractor usually has to ask, with the completion documentation in order. Guarantees left unclaimed keep the contractor's margin money tied up long after the work is finished.

If you have completed work and your guarantee has not been released, that is worth chasing formally rather than waiting. It is money doing nothing.

Common questions

It is stated in the tender document and varies by department and work type. Read it in the tender rather than assuming it matches the last one — departments do revise these, and the difference is real money.

Some departments accept alternative instruments; the tender says which. Where an FDR is accepted, the mechanics of getting it back differ, so ask before choosing.

A formal written request with completion documentation, then follow-up. Department follow-up is a service we run — send us the contract details and where it stands.

We prepare the documentation and work with your bank on the format. The banking facility itself is between you and your bank.

Send us your case

Send us the tender or work order and we will tell you what guarantee is required, in what format, and for how long.

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