Bank guarantees

Bid bond and performance bond in Saudi government tenders

The guarantee letter is the document that disqualifies more qualified bidders than any other: a value one riyal short, a validity ending before the bid expires, or an inaccurate entity name. This guide explains the bid bond and performance bond under the Government Tenders and Procurement Law, when each is required, and how to verify the letter before uploading it to Etimad.

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What does this service cover?

The bid bond is a bank guarantee submitted with the bid to secure the bidder's seriousness, at a percentage set by the entity between 1% and 2% of the bid value, valid for the whole bid validity period. The performance bond is submitted by the winner at 5% of the contract value within the statutory period after award notification and stays valid until contractual obligations end. Both are issued by a licensed local bank, or a foreign bank through a local one, on the tender's template.

The bid bond: when and how

Required in open and limited tenders and most procurement methods, with exemptions in cases the tender specifies:

  • Value: the tender percentage of your total bid including VAT unless stated otherwise. Round up slightly to avoid disqualification by rounding.
  • Validity: the whole bid validity period, usually ninety days from envelope opening, with extension if the entity extends validity.
  • Form: the tender template, unconditional, addressed to the entity's full official name.
  • Forfeiture: withdrawing the bid during its validity, or failing to submit the performance bond or sign the contract after award.
  • Release: to unsuccessful bidders after award, and to the winner after the performance bond is submitted.

The performance bond: 5% of the contract

After award notification the winner submits a performance bond of 5% of the contract value within fifteen working days, extendable by the entity; failure forfeits the award and the bid bond. It stays valid until handover or the end of the warranty period and must be extended with any contract extension.

Its cost sits outside the BOQ: issuance and renewal fees, and possibly cash cover for newer companies. Include it in the margin.

Recurring guarantee letter mistakes

Compare the letter with the tender word for word before uploading:

  • Value below the percentage because it was computed on the pre-VAT subtotal.
  • Validity ending before the bid expires or counted from submission instead of opening.
  • Beneficiary name incomplete or naming a branch instead of the official entity.
  • Conditional wording or the bank's own template instead of the tender form.
  • Wrong tender name or number in the letter.
  • Bond in the name of a different company than the bidder.

What you get

  • ✓ Bond requirements, percentages and validity extracted from the tender
  • ✓ Bid bond reminder before submission
  • ✓ Bond value computed from your financial total
  • ✓ Bond costs included in the cost breakdown
  • ✓ Guarantee letter checklist before upload
  • ✓ Full proposal with a financial terms and bonds section

How it works

  1. 1. Extract bond terms

    Analyse the tender to find the percentage, validity and template.

  2. 2. Request the letter

    Send the bank the template, official entity name and value well before closing.

  3. 3. Verify and upload

    Check the letter against the tender line by line, then upload it with the technical proposal.

Pre-submission checklist

  • □ Bond value equals or exceeds the required percentage
  • □ Validity covers the full bid period from envelope opening
  • □ Beneficiary name matches the official wording in the tender
  • □ Unconditional and on the tender template
  • □ Tender name and number correct in the letter
  • □ Bond issued in the bidding company's own name

Frequently asked questions

What is the bid bond percentage?

Set by the entity between 1% and 2% of the bid value and stated in the tender. The performance bond is 5% of the contract value.

Can a certified cheque replace the guarantee letter?

The rule is a bank guarantee on the approved template. Some entities accept specific alternatives if the tender says so; without explicit text, do not risk it.

Are SMEs exempt from the bid bond?

Exemptions exist in cases defined by the law, its regulations and the tender. Check the submission conditions of each tender and never assume exemption.

When is the bid bond released?

To unsuccessful bidders after award, and to the winner after the performance bond and contract signature. It is forfeited on withdrawal or failure to contract.