Public tenders ask for money at more than one point in the process. Knowing which deposit does what helps you plan cash flow and avoid parking funds longer than necessary.
Earnest money deposit
EMD is submitted with the bid. Its purpose is to make bidding serious: if you win and then refuse the order, or withdraw the bid during its validity period, the department keeps it. Unsuccessful bidders get it back after the award, and successful bidders usually have it adjusted against the performance security.
Micro and small enterprises registered under Udyam are exempt from EMD in many central government tenders. This exemption is one of the most valuable and least used benefits of MSME registration, and claiming it correctly requires attaching the certificate in the format the tender specifies.
Bid security declaration
Many departments now accept a bid security declaration instead of cash — a signed undertaking that you accept debarment if you withdraw or refuse the award. Where a tender allows this, it frees the EMD amount entirely. Check the instructions carefully, because the format of the declaration is usually prescribed and a non-standard version is rejected.
Performance security
This is furnished after you win, before the contract begins, and is typically a percentage of the contract value held for the full contract period plus a defect liability period. It is usually accepted as a bank guarantee, which costs a commission and often requires margin money or a fixed deposit as cover.
Planning for it
Before you bid, work out the total commitment: EMD now, performance security on award, plus any retention deducted from running bills. A contract that looks profitable on the rate can still be impossible if the deposits exceed what your working capital can carry.