Quick Tip: Performance security in GeM is the amount the winning bidder posts to guarantee contract execution. It replaces the EMD once in place. The winner's EMD is either adjusted against the performance security or refunded after the security is in place. The buyer encashes the security where the contract is not executed. The instrument format and amount are published in the tender document and carried into the contract.
Every seller winning a first GeM contract eventually asks how performance security in GeM works, how much it costs on the seller's side and what instruments the buyer accepts. This article walks through the mechanics and where ClearBid Tender Intelligence keeps the daily tender awareness running in parallel while the first contract moves through the security step.
The security itself is lodged against the contract on the Government e-Marketplace portal. The seller uploads the instrument details on the contract page and the buyer records acceptance of the security before deliveries begin.
Sellers who want the broader post-award walkthrough can revisit the first 48 hours after a GeM bid acceptance that places the performance security task inside the full post-award routine.
For sellers who want to see the broader bid-stage picture where EMD and performance security in GeM transition, the GeM bid security and EMD walkthrough describes how the two instruments sit at different stages of the bid lifecycle.
What Performance Security in GeM Guarantees
Performance security in GeM is the deposit the winning bidder posts to guarantee contract execution. It replaces the EMD that was posted with the bid. The buyer holds the security through the contract period and the warranty window. Sellers who see how the EMD transitions to performance security know that this is the step where the deposit relationship changes from bid-stage to contract-stage.
- Execution guarantee: the security covers the seller's commitment to deliver the contract as awarded
- Replaces EMD: the winner's EMD is adjusted against the performance security or refunded after the security is in place
- Held through contract period: the buyer holds the security through delivery and any warranty extension the contract names
- Encashable on default: the buyer can encash the security where the contract is not executed per the terms
Key point: Performance security in GeM is a larger figure than the EMD posted at bid submission. The seller plans the instrument preparation as a specific post-award task rather than as an extension of the bid-stage EMD.
Sellers who have been through only the EMD stage of a GeM bid often expect the performance security in GeM to work exactly like the EMD. The two share the deposit structure but differ in amount, timing and validity window. Reading the contract to confirm the specific amount, the accepted instruments and the validity window prevents the pattern of preparing a smaller or shorter instrument that then needs re-engrossing.
How Much Performance Security in GeM Is Required
The exact performance security in GeM amount is a percentage of the contract value and the tender declares the specific percentage. The percentage is tender-specific and the seller reads the contract to confirm it before approaching the bank. The amount scales with the contract value. A larger contract carries a proportionally larger security instrument.
- Percentage of contract value: the tender names the exact percentage; the seller computes the amount against the awarded contract value and reads it on the contract page
- Scales with contract size: a larger contract value translates to a larger security figure in absolute rupee terms for the seller to plan against
- Varies by tender: different buyers apply different percentages inside the ranges the general financial rules allow. Each contract is read on its own clause
- Explicit in the GeM contract: the exact amount appears in the contract page the buyer publishes on the portal and is confirmed in the Letter of Award documentation
Instruments That Count as Performance Security in GeM
The tender document specifies the instruments the buyer accepts as performance security in GeM. The common ones are a bank guarantee or a Fixed Deposit Receipt lien-marked in the buyer's favour. Some tenders also allow NEFT or RTGS deposits held in a specific account. Sellers who see the bid security and EMD walkthrough know this instrument list mirrors the EMD list, with the amount and validity window changed.
- Bank guarantee: issued by a scheduled bank in the buyer's specified format; the most common instrument
- Fixed Deposit Receipt: lien-marked in the buyer's favour where the tender allows an FDR as the instrument
- NEFT or RTGS deposit: a direct deposit into a specific buyer account where the tender permits it
- Validity window: covers the contract period plus any warranty extension the contract names
A bank guarantee for performance security in GeM takes one to two working days to issue through the usual banking channel. Sellers who start the issuance request on the day the award arrives have a working buffer against bank-side back-and-forth on the format or the wording the buyer specified. The buffer matters because the bank often needs clarification on specific wording the GeM contract uses. Iterating with the bank takes time the submission window may not have.
Sellers using the same bank repeatedly for performance security in GeM instruments usually see faster issuance times after the first contract. The bank's own familiarity with GeM contract wording improves on repeat engagements. First-time sellers should expect the initial instrument to take the longer end of the one-to-two-day range, since the bank is reviewing the GeM contract format against its own template library for the first time.
What Happens to the EMD After the Security Is in Place
On a GeM contract, the winner's EMD is either adjusted against the performance security in GeM or refunded after the security is in place. Sellers who see the EMD amount walkthrough on GeM tenders know that this transition is standard across tenders that applied bid security.
- Adjustment path: the EMD amount gets credited against the performance security figure, reducing the fresh amount the seller has to post for the new instrument
- Refund path: the EMD is refunded to the seller once the performance security is in place and the buyer confirms acceptance of the instrument on the portal
- Which path applies: the contract or the buyer's standing policy decides between adjustment and refund; the seller follows what the contract document says in writing
- Timing: both paths typically run after the security is accepted at the buyer's end; a short gap often follows between security acceptance and the EMD transition
How Performance Security in GeM Interacts With the GeM Work Order
The GeM work order is often held until the performance security in GeM is accepted. Some buyers release the first invoice only after the security is on record. Sellers who see the common post-award mistakes on a GeM work order know that a delayed security is one of the primary reasons the first invoice cycle stalls.
The practical sequence is: Letter of Award, acknowledgement by the seller, performance security submitted, security accepted at the buyer's end, delivery mobilised, first delivery recorded, invoice raised, invoice cleared. A delay at the security step pushes every downstream step back by the same number of working days. Teams running their first GeM work order through this sequence usually find the security step is where the first operational friction lands, since the bank's pace sits outside the seller's control.
Common Mistakes Sellers Make on First-Contract Security
Key point: The common mistakes on a first-contract performance security in GeM are starting the bank engagement late, using an older template that does not match the buyer's current wording and planning the validity window short of the contract plus warranty period.
- Late start: initiating the bank guarantee on the deadline day leaves no room for format corrections or bank-side delays during the issuance window
- Wrong format: using an older template from a different buyer; the current buyer's format may differ in material wording that the bank cannot adjust without a fresh instrument
- Short validity: a validity window that ends before the warranty period concludes triggers a re-engrossment later at additional bank fees
- Missing reference: omitting the specific contract reference number the buyer asks to see on the instrument stalls buyer-side acceptance
The pattern across these mistakes is time pressure rather than inattention. Teams that build the performance security in GeM task into the Day One post-award checklist usually avoid the delayed-start pattern. A written internal checklist that mirrors the four tasks of the first 48 hours makes the security step visible as a parallel track to the Letter of Award acknowledgement.
How ClearBid Tender Intelligence Fits Alongside the Post-Award Routine
ClearBid does not run the post-award security step. The instrument preparation, buyer-side acceptance and warranty-window tracking sit with the seller against the GeM contract. ClearBid Tender Intelligence continues delivering the 8 a.m. keyword-matched tender alerts even while the first contract moves through the security step. The next tender surfaces in time to be pursued.
The service scope stays within the keyword-matched alert. Tender Intelligence does not match on turnover, past performance or eligibility criteria. It does not run post-award execution. Sellers who take up GeM Onboarding with ClearBid receive Tender Intelligence complimentary for three months, which keeps the daily tender awareness in place while the first contract moves through performance security and delivery.
Register on ClearBid today and get Tender Intelligence alerts that surface the next matched tender while the first contract moves through the performance security step.
Frequently Asked Questions About Performance Security on a First GeM Contract
Q1. What is performance security in gem and how is it different from EMD?
Performance security in gem is the deposit the winning bidder posts to guarantee contract execution. It replaces the EMD that was posted with the bid. The buyer holds the security through the contract period and any warranty window. EMD, by contrast, was a smaller deposit posted at bid submission to demonstrate serious intent and is adjusted or refunded once the performance security is in place.
Q2. How much performance security in gem does the first contract require?
The exact performance security in gem amount is a percentage of the contract value, with the specific percentage declared in the tender document and carried into the contract. The amount scales with the contract value. A larger awarded contract translates to a larger security figure. The seller reads the contract to confirm the exact amount before approaching the bank for the instrument.
Q3. Which instruments are accepted as performance security on a gem contract?
The gem contract typically accepts a bank guarantee issued by a scheduled bank in the buyer's specified format or a Fixed Deposit Receipt lien-marked in the buyer's favour. Some contracts also allow NEFT or RTGS deposits into a specific account. The validity window on the instrument covers the contract period plus any warranty extension the contract names.
Q4. How does performance security in gem interact with the gem work order?
The GeM work order is often held until the performance security in gem is accepted at the buyer's end. Some buyers also release the first invoice only after the security is on record. A delayed security therefore pushes every downstream step back, from delivery mobilisation through first-invoice clearance. Starting the instrument issuance within the first 24 hours of the award leaves room for format corrections.
Q5. What happens to my EMD after the performance security is in place?
The winner's EMD is either adjusted against the performance security amount or refunded after the security is in place and accepted by the buyer. The specific path depends on the contract's own wording. The adjustment path reduces the fresh amount the seller has to post; the refund path returns the EMD once the security is confirmed on the buyer's side.
Q6. Does ClearBid handle performance security on a GeM contract?
ClearBid does not handle the performance security instrument preparation or submission. Tender Intelligence delivers the 8 a.m. keyword-matched tender alerts and continues running while the first contract moves through its post-award steps. Tender Proposal supports the pre-award technical proposal stage. The security itself is arranged through the seller's bank directly, with the format following the buyer's specification.
