The earnest money deposit (EMD) in a public tender serves to:
Choose the correct answer
Cover the contractor's material procurement costs
Ensure the successful bidder does not withdraw before executing the contract agreement
Provide a fund for defect rectification after project completion
Act as an advance payment for mobilisation
Correct Answer
B. Ensure the successful bidder does not withdraw before executing the contract agreement
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EMD (bid security) protects the tender authority: if the L1 bidder withdraws after acceptance or refuses to sign, EMD is forfeited. Typically 2–5% of estimated project cost. EMD of unsuccessful bidders is refunded promptly; successful bidder's EMD is adjusted against security deposit after signing.
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