Bank Guarantee Registration (Tender Security)

What Is Tender Security?

Tender security is a kind of guarantee for the customer that the supplier will fulfill their obligations and will not refuse to sign or execute the contract.

 

The Law of Ukraine "On Public Procurement" provides for two possibilities for using tender security:

• • provision of a tender offer;
  • ensuring the execution of the purchase contract.

 

During the creation of the tender, the organizer determines at their discretion whether the tender security will be applied during the procurement or not. The supplier, in turn, submits tender security to confirm that they will not refuse to fulfill the terms of their tender offer or the terms of the contract.

 

Next, we give information about the types of tender security. To go directly to the guarantee registration instructions on SmartTender.biz, click here.

 

Security of the Tender Offer 

Security of the tender offer is the provision of security for the fulfillment of the obligations of the supplier to the organizer arising in connection with the submission of the tender offer. The conditions for providing tender security are specified by the organizer in the tender documentation, in particular its type, size, validity period, and caveats regarding cases when the security of the tender offer is not returned to the supplier.

 

The Law of Ukraine "On Public Procurement" provides only such a type of tender security as a guarantee. Depending on which institution issues the guarantee, the security of the tender offer can be divided into the following types:

1. 1. Bank guarantee.
   2. Insurance guarantee.
   3. Financial institution guarantee.

 

The security of the tender offer is submitted electronically as part of the supplier's tender offer.

 

The most common type of guarantee required by public procurement customers is a bank guarantee (Fig. 1).

 

Fig. 1

 

What Is a Bank Guarantee?

A bank guarantee is a document in which the bank guarantees the organizer the transfer of a certain amount specified in the purchase conditions in the event of a guarantee. That is, in the case when the supplier has not fulfilled the obligations related to the submission of a tender offer.

 

To order a bank guarantee, you need to contact a bank branch or submit an application directly on the SmartTender platform.

 

How Does a Bank Guarantee Work?

If you participate in procurement, the bank guarantee works as follows:

1. 1. You order a bank guarantee from the selected institution.
   2. You pay the required amount to the institution, and then it is stored in a separate account.
   3. You upload the confirmation of the bank guarantee together with the tender documents.
   4. After the end of the tender, the customer turns to the bank with a request to return the guarantee to you.
   5. In the event of a warranty case, the warranty will not be returned to you.

 

The size of the security of the tender offer is no more than 0.5% of the expected value for the purchase of works and no more than 3% for the purchase of goods or services.

 

When Is the Guarantee NOT Returned?

The tender security is not refundable in the following cases:

• • if you have withdrawn a tender offer or an offer after the deadline for its submission has expired, but before the period during which tender offers are considered valid has expired;
  • if you did not sign the purchase contract after becoming its winner;
  • if you did not provide, in the event of victory, within the period specified in Part 6 of Art. 17 of the Law "On Public Procurement", documents confirming the absence of grounds provided for in Art. 17 of the Law;
  • if you did not provide, in the event of a victory, security for the performance of the procurement contract after receiving a notification of the intention to conclude a procurement contract, if the provision of such security is provided for in the tender documentation or the announcement of the simplified procurement.

 

When the Guarantee Is Returned?

The security of the tender offer is returned to you within five banking days from the date of occurrence of the reason for returning the security of the tender offer in the event of:

• • the expiry of the validity period of the provision of the tender offer specified in the tender documentation;
  • concluding a purchase agreement with the supplier who won the tender;
  • withdrawal of a tender offer before the deadline for its submission;
  • the end of the procurement procedure if a purchase agreement is not concluded with any of the suppliers who submitted tender offers.

 

Ensuring the Execution of the Procurement Contract

Enforcement of the procurement contract is the provision of security for the performance of the supplier's obligations to the organizer under the procurement contract. Enforcement of the contract may be required in any form, such as a guarantee, deposit, etc.

 

Information on the enforcement of the contract is prescribed by the customer in the tender documentation and is usually indicated in the terms of the contract, which is signed as a result of the procurement.

 

Enforcement of the execution of a procurement contract can be divided into the following types:

1. 1. Bank guarantee.
   2. Insurance guarantee.
   3. Financial institution guarantee.
   4. Payment to the account of the organizer.

 

The amount of security for the performance of the procurement contract may not exceed 5% of the value of the contract.

 

This type of security is obtained in paper form without using the electronic procurement system and is provided by the winner of the tender.

 

Terms and Conditions for the Return of Security for the Performance of the Purchase Contract

The organizer returns the security for the performance of the purchase contract in the following cases:

• • after the performance of the contract by the winning supplier;
  • if the court recognizes the results of the procurement procedure or the procurement contract as invalid;
  • in the cases stipulated by Article 37 of the Law "On Public Procurement", as well as by the conditions specified in the contract, but no later than within five banking days from the date of occurrence of the specified circumstances.

 

How to Order a Bank Guarantee?

You can order a bank guarantee in one of the following ways:

1. 1. Contact your bank.
   2. Order on the SmartTender.biz site.

 

Ordering a Bank Guarantee on the SmartTender.biz Site

To order a guarantee on the SmartTender.biz site, do the following:

1. 1. Go to the page for detailed information about the tender for which you plan to order a guarantee.
   2. Click the "Issue" button (Fig. 2).

 

 

Fig. 2

 

      3. In the window that opens, select the institution in which you want to issue a guarantee (Fig. 3).

 

Fig. 3

 

      4. Select the lot (lots) for which you issue a guarantee (in case of multi-lot purchase) (Fig. 4).

 

 

Fig. 4

 

      5. Fill in the required fields (Fig. 5):

• • • "Guarantee validity period, days" - must match with the validity period of your offer, otherwise the customer will be forced to reject it. You can check the validity period of the offer in the conditions of the tender documentation.
    • "Type of pledge" (if such a field exists).

 

Fig. 5

 

      6. Click the "Choose files" button and add the necessary documents. Each bank itself determines the list of documents required for approving the application (an application for obtaining a bank guarantee is a mandatory document).

      7. Click the "Send application" button (Fig. 6).

 

Fig. 6

 

After that, confirmation regarding the submission of the application will appear on the screen (Fig. 7).

 

Fig. 7

 

After these actions, you will be contacted within a few hours by an employee of the institution you have chosen to order the guarantee. They will help you complete the guarantee and advise you on all questions regarding its cost.