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
Why is this the answer?
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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