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Earnest Money Deposit
Earnest Money Deposit (EMD) means Bid Security/ monetary or financial guarantee to be furnished by a Bidder along with its tender. Earnest Money Deposit (EMD) means Bid Security/ monetary or financial guarantee to be furnished by a tenderer along with its tender.
EMD deposited by the unsuccessful tenders will be refunded by way of handing over the original Demand Draft/ Bankers Cheque duly endorsed by the Competent Authority of the Centre. The Earnest Money of the Successful Tenderer will be adjusted against the Security Deposit to be recovered from the running account bills. The main purpose of EMD is to ensure that only capable and serious bidders participate in the tender, as it acts as a guarantee that the bidder will enter into a contract if selected.
Importance of Earnest Money Deposit in Tender
The importance of EMD in tendering lies in its ability to help tendering authorities filter out non-serious or incapable bidders, ensuring fair and transparent competition. It also helps protect the tendering authority’s interests by providing a financial guarantee that the selected bidder will enter into a contract and fulfill the tender terms.
EMD is also a safeguard for the tendering authority if a bidder withdraws from the bidding process after being selected. In such a case, the tendering authority can forfeit the EMD as a penalty for breaching the bidding terms.
Also Read: Different Types of Tenders & Tendering Processes used in Construction
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