The three kinds
Law 4412/2016 (article 72, as replaced by Law 4782/2021) provides for three guarantees. All are calculated on the estimated value of the contract excluding VAT, not on your offer. That change was made in 2021 precisely so that very low bids would not enjoy smaller guarantees.
Participation guarantee
Lodged with the bid, in the participation documents sub-folder, it assures the authority that the bidder will not withdraw its offer and that, if it wins, it will sign the contract. Its amount is set in the tender documents as a specific figure, in numbers and words, and cannot exceed 2% of the estimated value. If the contract is divided into lots, the guarantee corresponds to the lots you bid for.
It is not required in five cases the law lists expressly: framework agreements, dynamic purchasing systems, direct awards, selection from a catalogue and selection from an electronic catalogue. In every other procedure, that is in every open tender above 30,000 euros, it is required unless the tender documents say otherwise.
Validity. It must remain valid for at least 30 days after the offer validity period ends. If the tender documents require a twelve-month offer validity, the guarantee must run for thirteen. A guarantee with a shorter term is rejected, and the bid with it. If the procedure drags on, the authority asks for an extension of the offer and the guarantee, and whoever does not extend drops out.
Release. To the contractor, on lodging the performance guarantee. To the other bidders, after the appeal deadlines have passed unused or after their final rejection. In practice the capital stays tied up for months, and that cost belongs in your pricing.
Forfeiture. It is forfeited to the authority if the bidder withdraws its offer, if as provisional contractor it fails to produce the award evidence or produces inaccurate evidence, or if it does not turn up to sign the contract.
Performance guarantee
Lodged by the contractor before or at the signing of the contract, it covers the fulfilment of the contractual obligations. It is 4% of the estimated value excluding VAT for supplies and services and 5% for works and studies. For framework agreements it is calculated at 0.5% of the total value. For contracts up to 30,000 euros the authority may waive it, so in direct awards of supplies and services it is usually not requested.
It is released after the final quantitative and qualitative acceptance of the whole subject matter. In contracts with partial deliveries it may be released gradually, in proportion to the part accepted, if the tender documents so provide. It is forfeited if the contractor is declared in default or to collect penalties the contractor does not pay.
Advance payment guarantee
When the contract provides for an advance payment, the contractor lodges a guarantee equal to the advance. The advance bears interest at a rate set by the Minister of Finance and is set off against payments. The guarantee is released gradually as the advance is set off.
Who may issue them
- Banks and financial institutions lawfully operating in an EU or EEA member state, or in a third country that has signed the WTO Government Procurement Agreement.
- Insurance companies licensed for the guarantee class under Law 4364/2016.
- ΤΜΕΔΕ, the Engineers and Public Works Contractors Fund, for its members, issued electronically.
- The Deposits and Loans Fund, by a deposit receipt for the amount in cash.
Electronically issued guarantees are submitted as an electronic file in ΕΣΗΔΗΣ. Paper guarantees are submitted as a digital copy in ΕΣΗΔΗΣ and the original is delivered to the authority within the deadline in the tender documents, usually three working days. The authority contacts the issuer to verify authenticity.
What it must say
ΕΑΔΗΣΥ tender templates include a guarantee template and banks know it. The committee checks: issuer and date of issue, guarantee number, the contracting authority it is addressed to, the economic operator on whose behalf it is issued (and all members in the case of a consortium), the amount, the title and number of the tender or contract, the validity period, the issuer's waiver of the benefit of discussion and the undertaking to pay within five days of a simple written demand. A wrong authority name or a wrong tender number is a ground for rejection that cannot be fixed afterwards.
The cost
Banks charge a commission calculated annually on the guarantee amount and often require collateral through a blocked deposit, especially from small companies. ΤΜΕΔΕ is usually cheaper for engineers. The Deposits and Loans Fund requires the full amount in cash. For a company bidding in ten tenders a year with an average value of 200,000 euros, participation guarantees tie up as much as 40,000 euros of credit lines for months. That is one more reason to be selective about which tenders you enter.
GOVADI's fit report identifies the amount and validity of the participation and performance guarantees in every tender document, so that you know the cost of participation before you decide BID or NO-BID.
Frequently asked questions
How much is the participation guarantee in a Greek public tender?
Up to 2% of the estimated contract value excluding VAT, at the exact amount set in the tender documents. It is not required in direct awards, framework agreements, dynamic purchasing systems and selection from a catalogue.
How much is the performance guarantee?
4% of the estimated value excluding VAT for supplies and services and 5% for works and studies, under article 72 of Law 4412/2016 as in force since 2021. For contracts up to 30,000 euros the authority may waive it.
How long must the participation guarantee be valid?
At least 30 days after the end of the offer validity period set in the tender documents. A guarantee with a shorter term leads to rejection of the bid.
Can I deposit cash instead of a guarantee?
Yes, through a deposit receipt at the Deposits and Loans Fund. The amount stays blocked until the guarantee is released.
When is the performance guarantee released?
After the final quantitative and qualitative acceptance of the whole contract. In partial deliveries it may be released gradually, if the tender documents so provide.