When can the government forfeit a bid security?

A government procuring agency may forfeit a bidder's bid security in circumstances authorised by the applicable procurement rules and the tender's legally effective conditions. Bid security protects procurement integrity by discouraging withdrawal or refusal to honour defined commitments during the bid-validity period. It is not a general fund from which a department can impose any arbitrary penalty because a bidder complained about evaluation or failed to win. The Federal Public Procurement Rules, 2026, effective from September 2026, establish new federal requirements concerning security amounts and bid validity, including rules 36–37.

Identify the exact security instrument

Bid security may take the form required by the applicable standard bidding document, such as a bank guarantee or deposit. Its language can govern demand mechanics, beneficiary, expiry and amount. An unconditional bank instrument can present questions distinct from the underlying entitlement between agency and bidder. The agency should not assume that payment by the issuing bank resolves whether the forfeiture was substantively lawful. The bidder should preserve the original guarantee and invocation notice.

Applicable procurement legislation

The federal 2026 Rules replaced the former framework for federal procurements, with distinct provisions for eligibility, security and validity. Provincial procurement statutes and rules remain relevant for provincial agencies. Determine which law applied to the specific tender and whether a transitional question exists. A bid opened under an older governing instrument should not automatically be evaluated against a new rule without examining commencement and saving provisions.

Security amount restrictions

Rule 36 of the federal 2026 Rules provides for bid security not exceeding five percent of estimated procurement value in procurements up to Rs. 250 million and not exceeding two percent above that threshold, subject to its terms. Where security is not required, a bid security declaration may be prescribed. A tender should comply with the applicable amount and form. The agency cannot necessarily justify an excessive demand by invoking an older template.

The bid-validity period

Rule 37 requires the validity period to be specified in bidding documents. The agency generally must process evaluation and issue a letter of award within that period, subject to the rule's extension provisions. Forfeiture arguments should identify whether the bidder's obligations were still operative on the relevant date. A demand made long after lapse of a guarantee can create different questions from withdrawal during valid commitment.

Withdrawal of a live bid

If a bidder withdraws an offer during a binding bid-validity period contrary to a lawful tender condition, forfeiture may be available according to the applicable rules and instrument. The agency should establish the actual withdrawal and contractual trigger. A clarification request or challenge to an unlawful evaluation is not automatically withdrawal. The bidder should keep written communications showing whether it remained willing to perform at the offered terms.

Refusal to sign the contract

A successful bidder who refuses to execute the prescribed contract after valid award may face bid-security consequences under tender terms and rules. The agency must show the bidder was lawfully selected and required to sign on terms consistent with the tender. A demand to accept materially different obligations after award can raise a dispute about whether the refusal falls within the security's trigger. The record should include the award letter, draft contract and bidder's response.

Failure to provide performance security

Tender documents often require the successful bidder to submit performance security within a prescribed period. Failure can trigger consequences where lawfully stated. The agency should determine whether any extension or waiver was granted and whether its demand complied with the security instrument. A bidder cannot assume a verbal assurance of more time from an unauthorised official modifies the written requirement. Conversely, the agency should not overlook an actually approved extension.

Refusing to extend bid validity

Rule 37 of the federal 2026 Rules addresses requested extensions under exceptional circumstances and expressly permits a bidder declining an extension to withdraw without forfeiture of bid security. This distinction is crucial. A bid may expire through a lawful refusal to extend rather than an impermissible withdrawal during existing validity. The agency should not penalise the bidder for exercising the rule's permitted choice.

Revised technical requirements

The 2026 Rules' two-stage bidding procedures contain circumstances where a bidder unwilling to conform to revised technical requirements may withdraw without forfeiture. The agency should identify the actual method selected and stage at which the changes occurred. A bidder's refusal to accept newly changed conditions is not automatically a default under the original bid. The tender record and rule should be compared carefully.

Material misrepresentation

Submitting forged bid documents or knowingly false eligibility information may attract separate disqualification or blacklisting consequences. Whether bid security may also be forfeited depends on the tender and applicable legal trigger. The agency should not assume every sanction can be imposed simultaneously without statutory basis. The bidder is entitled to the relevant procedural safeguards for each decision, including blacklisting proceedings where applicable.

The guarantee's demand clause

An on-demand guarantee may require the bank to pay upon a conforming demand, while the underlying bidder may still dispute the agency's entitlement. The legal conditions for restraining invocation can be strict. The bidder should obtain specialist advice promptly, because a court may treat autonomous banking instruments separately from the procurement contract. A letter to the department does not necessarily suspend the bank's payment obligation.

Proof of the alleged default

Preserve bid submission records, EPADS communication, price and technical proposals, award letter, requested extensions and official notices. An agency should be able to identify the exact act satisfying the forfeiture clause. A demand merely stating "the bidder was uncooperative" is less defensible than a dated lawful refusal to sign. Bidder intent, procedural context and any agency modification may matter.

Grievance and interim relief

Use the grievance or appellate mechanism prescribed by applicable federal or provincial procurement law, while considering the bank guarantee's demand timetable separately. A bidder should not assume a grievance automatically restrains invocation. Timely interim relief may be important where a large security is about to be called. The complaint should distinguish the tender decision, invocation and any blacklisting order.

A withdrawal example

A bidder submits a valid proposal but decides to leave the market while the original bid-validity period remains in force. If the tender validly prohibits withdrawal and the relevant statutory conditions apply, the agency may have a case for forfeiture. The bidder's commercial reasons do not automatically excuse the breach. The exact offer and guarantee must still be examined.

An extension example

The procuring agency fails to complete evaluation before bid expiry and asks all bidders for an extension through the authorised process. One bidder lawfully declines and withdraws. Under rule 37, that refusal should not by itself lead to forfeiture. The bidder should preserve the extension request and its response. An agency invoking the security nonetheless may face a strong procedural objection.

A changed-contract example

After award, the agency demands a new performance obligation not contained in the original bid documents. The winning bidder declines that material change but offers to sign the original tender contract. The parties must determine whether the agency's new requirement is lawful and whether any actual default occurred. The bidder should document willingness to execute the contract on the awarded terms.

Opinion and recommended course

Bid security can be forfeited only in legally authorised circumstances consistent with the tender and instrument. Check applicable rule, amount, bid validity, withdrawal and award events, and guarantee language. The 2026 federal rules expressly protect bidders lawfully declining certain validity extensions or revised technical requirements. Challenge unsupported invocation promptly through the appropriate mechanism.

Principal authorities: Federal Public Procurement Rules, 2026, especially rules 36–37 and relevant bidding method provisions; PPRA Ordinance, 2002; Contract Act, 1872; applicable provincial procurement rules and bid security instrument. Official text: https://epms.ppra.gov.pk/public/procurement-rules.