Alternatives to bid security

What you need to know:

There is nothing as bad as the delay that may befall a procurement process when a bidder withdraws their bid before the end of the bid validity period or even worse, refuses to sign the contract when the award is given. Mathias Wandera writes.

For government procurements, when a bidder withdraws from the process, this will not only cause a delay in the delivery of public goods and services but will also lead to a waste of public funds due to the time and effort needed to go about the procurement process all over again.
It is thus out of the necessity to avoid such major set-back that the provision of bid-security has today become customary during the bidding process.
Bid security, in the words of Mr Silver Mukasa, a procurement officer at Uganda Prisons, is an amount of money that bidders guarantee as assurance to the client that they, as bidders shall not withdraw their bids until the end of the stipulated bid validity period, and that if awarded shall indeed go ahead and sign the contract, or risk forfeiting the bid security amount to the client.
“It is a way of ensuring that we eliminate unserious people, and it is often effective,” Mr Mukasa highlights.

Shortfalls
But in as much as bid security continues to be a commendable arrangement, some procurement experts are starting to pay attention to its shortcomings and already pointing at other alternatives.
Ms Zahra Naluwaga, a procurement officer at Fast Couriers Uganda, is quick to note that for her, the major downside to bid security is the fact that it often locks many good bidders out of the process, especially today when procuring entities are bold enough to quote security that is up to 10 per cent of total contract value.

Exorbitant fees
Ms Naluwaga says: “There are so many cases where qualified bidders have been forced to back down simply because they cannot afford over-the-top bid security amounts. This reduces the number of bids received, thereby effectively restricting competition.”
She also says that some bidders are now factoring the bid security cost into their quotation, thereby defeating the very motive of bid security.

Expert’s take on security fees
It is a way of ensuring that we eliminate unserious people, and it is often effective. Procuring entities should ensure to quote affordable bid security, or find other alternatives.