ESTIMATION

Earnest Money Deposit (EMD)

Refundable bid security a tenderer deposits to confirm a genuine offer

Also calledearnest money depositEMDbid securitytender depositbid bond
Definition

Earnest Money Deposit (EMD), also called bid security, is the amount a bidder submits along with the tender as a guarantee that the offer is serious and that, if selected, the bidder will accept the work and furnish the performance security. It is typically a small percentage of the estimated cost (commonly 1-2.5%, with absolute caps under GFR/Public Procurement norms) submitted as a demand draft, bank guarantee, or now frequently as an online/Bid Security Declaration in e-procurement.

EMD of unsuccessful bidders is refunded after award; the successful bidder's EMD is returned (or adjusted into the security deposit) once the performance guarantee + agreement are in place. It is forfeited if a bidder withdraws/modifies the bid within its validity, or if the awarded bidder fails to execute the agreement or furnish the performance security — protecting the employer against frivolous or non-committal bids.

Where used
  • Tender submission + bid-evaluation eligibility
  • Protecting employer against bid withdrawal/default
  • GFR / public-procurement compliance
  • Conversion/adjustment into security deposit on award
  • e-Procurement bid-security declarations
Acceptance / threshold
Per the tender + procurement rules (typically 1-2.5% of estimated cost, subject to GFR caps). Forfeited on bid withdrawal within validity or failure to execute the contract/furnish performance security; otherwise refunded.
Frequently asked
What percentage is earnest money deposit?
Commonly 1-2.5% of the estimated tender value, subject to monetary caps under GFR/public-procurement guidelines; many e-tenders now accept a Bid Security Declaration instead of a cash EMD.
When is EMD forfeited?
If a bidder withdraws or modifies the bid during its validity period, or if the successful bidder fails to sign the agreement or furnish the performance security within the stipulated time.
Related terms
Retention Money
A percentage deducted from each running bill, released after defect liability
Bill of Quantities (BOQ)
Itemised list of work activities with quantities and unit rates — forms the priced contract document.
Detailed Estimate
Quantity-based estimate from drawings. Each work item × unit rate × quantity = cost. ±5% accuracy.
Abstract Estimate
Cost estimate at concept stage based on plinth area or per-bed/per-room rates. ±20% accuracy.
Contingency
Provision for unforeseen costs. CPWD: 3%. Private: 5-10%. Higher for renovation than new build.
Rate Analysis
Computation of unit rate from material + labour + plant + overhead + profit. Reference: DSR, state SOR, in-house DB.
Construction Cost Estimation
Per sqft cost ₹1500-3500 in India
Material Wastage Factors
Cement 2-3%, steel 3-5%, tiles 5-10% typical
Quantity Estimation
Estimate cement, steel, sand, aggregate for given area
Extension of Time (EoT)
Contractual grant of extra completion time for excusable (non-culpable) delay