EMD Calculator for Government Tenders

Earnest money on an Indian government tender is bid security lodged with the buyer. It shares a name with the earnest money a home buyer puts down in a property sale, and nothing else.

The amount is not something you derive. It is stated by the buyer, and the work is to read it correctly. It appears in the notice inviting tender in one of a few shapes:

• A percentage of the estimated cost of the work. The common case, and what this calculator is built for.
• An absolute rupee figure. Nothing to compute. Pay what is written.
• A percentage with a ceiling, so the deposit stops rising above a certain estimated cost.
• A bid security declaration in place of a deposit. General Financial Rules 2017 provide for an undertaking instead of cash, and where a notice uses it, the deposit is nil.

The percentage varies by department, between works and supply tenders, and sometimes between two tenders from the same office. That is why it is an input here rather than a fixed rate. Overwrite the default with the figure in your document.

Public tender list feeds do not carry estimated value or EMD. Both live inside the tender document. How to read a tender document covers where the clause usually sits.

Three lines, and a fourth once you decide how to pay.

Deposit equals the estimated cost of the work multiplied by the EMD percentage in the notice. Where the notice sets a ceiling, take the lower of the two. Where it states an absolute figure, the percentage is irrelevant and the figure governs.

Exemption. A micro or small enterprise registered on Udyam is exempt from EMD and from the tender fee under the Public Procurement Policy for Micro and Small Enterprises 2012. On production of a current certificate the deposit becomes nil.

Holding cost equals the deposit, multiplied by your annual cost of capital, multiplied by the months to refund divided by twelve. That is the price of the money sitting with the buyer.

Cash actually locked depends on the instrument. A demand draft or an online payment locks the full amount. A fixed deposit receipt pledged to the buyer locks the full amount but generally continues to earn interest in your name. A bank guarantee locks only the margin money your bank holds, and costs commission on top. Bank guarantee, FDR or insurance surety bond works through the difference, and the bank guarantee cost calculator prices it.

Months to refund and cost of capital are what make this more than a multiplication.

Months to refund is the gap between the day the money leaves your account and the day it comes back. It is not the bid opening date. For an unsuccessful bidder the buyer's need for security ends once the award is decided, but the refund follows the buyer's accounts process rather than a calendar date, and nothing prompts it if nobody writes. Use the period you actually experience with that department, not the period the clause implies. The EMD refund process covers how to shorten it.

Cost of capital is what that money would otherwise have done. For most contracting firms it is the rate on the cash credit or overdraft facility the deposit would have paid down, because bid deposits are funded from the same limit that funds materials and wages. If you are not borrowing, it is the return on the work you cannot take while the cash is committed. Either way it is your number, so the field takes yours rather than assuming one.

Multiply the three together and you have a per-bid cost that appears in no tender document and in very few bid sheets.

Five errors account for most of the wrong answers people get from this calculation.

• Using your quoted price instead of the estimated cost. EMD is normally computed on the estimated cost of the work put up by the buyer, not on what you intend to quote. Read which one the clause names.
• Carrying the percentage over from the last tender. Percentages do not travel between departments, and often not between two tenders from the same office. A shortfall found at technical evaluation is not fixable afterwards.
• Ignoring the ceiling. On a large work the capped figure can be well below the percentage figure. Bidders who miss it overstate their committed capital and decline bids they could have funded.
• Setting the months optimistically. Two months entered for a refund that has historically taken six understates the cost by two thirds. Use your own history with that buyer.
• Treating a bank guarantee's face value as locked cash. What is locked is the margin money, plus the commission you pay. Enter the deposit for the EMD figure, then price the instrument separately.

One more that is not an input error but costs bids: the instrument's own validity has to outlast the bid validity period the notice sets. See bid validity period.

The exemption is real, and it is not the buyer's to grant. Under the Public Procurement Policy for Micro and Small Enterprises 2012, micro and small enterprises registered on Udyam are exempt from EMD and from the tender fee, on production of a current registration certificate. Tick the exemption here and both the deposit and the holding cost go to nil. What Udyam registration is worth covers the rest of the package.

Four boundaries worth holding clearly.

• Medium enterprises are not covered. The exemption follows classification, so a firm that has grown into the medium category no longer holds it. The MSME classification calculator settles which category you are in.
• The registration must be current. A lapsed or out of date Udyam record is treated as no record at all.
• Exemption from EMD is not relaxation of eligibility. General Financial Rules 2017 allow a buyer to relax prior turnover and prior experience for startups and MSEs. That is written as a discretion, and it applies only where the buyer has exercised it in the notice. Never read one as implying the other.
• A performance guarantee is still owed if you win. Performance bank guarantee covers what that costs.

It answers one question, which is what this bid ties up and what that costs. It does not answer these.

• Whether you are eligible. EMD is payable by anyone who bids. Turnover, similar work experience and registration class decide whether the bid survives. Start at tender eligibility criteria.
• The full cost of bidding. Where you are not exempt, the tender fee is a cost rather than a deposit and does not come back. Document costs, the digital signature certificate, travel to a pre-bid meeting and the performance guarantee on award all sit outside this figure.
• Your total committed capital. That is every live EMD, plus margin money on outstanding guarantees, plus retention held on running contracts. EMD and working capital turns it into a capacity number.
• Forfeiture risk. Forfeiture is contractual and applies on the grounds the notice states. See when EMD can be forfeited.
• A delayed refund. The model assumes the money returns in the months you entered. Where an award is challenged or the tender is cancelled and reissued, security can be held longer.

Everything on this page computes in your browser. No figure you type is sent anywhere.

The number sometimes comes out badly, either on one large tender or across several running at once. Work through it in this order.

1. Check the exemption first. If you are an eligible micro or small enterprise and still paying EMD, the problem is a registration, not a shortage of capital. Udyam registration for tenders is the fix.
2. Change the instrument, if the notice permits it. A bank guarantee or an insurance surety bond locks margin money instead of the full amount. Offering an instrument the notice does not list is a rejection, so check the clause before you plan around it.
3. Chase the deposits already out. The capital for the next bid is often your own money sitting unrefunded from a bid decided months ago.
4. Sequence the bids. Two bids run properly beat four run on capital you do not have.
5. Decline it. A bid you cannot fund to award is a loss with extra steps, and cost of committed capital belongs in the bid or no bid decision.

Avsar tracks EMD and performance guarantees alongside the tenders you are working on, so committed capital is a figure you can see rather than one you reconstruct each month. Start from live tenders.