Issue Date: 
Monday, June 27, 2016

Financial Guarantees for Tenders

It is becoming more and more important for companies responding to Government tenders in South Africa, to proof that the company responding, has financial capacity to execute the contract. The reason for this is to safeguard Government Entities against companies being awarded a tender and then failing to execute because of a lack of financial resources. 

Underneath is a typical Financial Guarantee requirement we found in a recent Gauteng Provincial Government tender:

"The responding bidder must show capacity to deliver a sustainable service for a period of three (3) months without external support.
In order to do so a Bank guarantee letter must be provided and this will count for 10 points towards the Functionality score:

  • Supplying a R9 000 000.00 financial guarantee will earn the bidder 10 points;
  • Supplying a R6 000 000.00 financial guarantee will earn the bidder 6 points;
  • Supplying a R5 000 000.00 financial guarantee will earn the bidder 3 points;
  • A guarantee of less than R5 000 000.00 will earn the bidder zero points.

Any other proof of financial resources of funding which the bidder intends on utilising to fund this project can also be submitted. (The Department requires this information to ascertain whether the bidder can carry the initial cash commitments for a period up to three (3) months for the district, or each of the districts, awarded to the bidder without any additional external support)."

As you can see from the example it is important to have financial resources in order to secure a tender.

A Financial Guarantee is also called a Bid Bond, Tender Bond or a Tender Guarantee.

The purpose of a tender guarantee is to safeguard procuring entities against unqualified bidders submitting a bid. The tender guarantee acts as security against the risk of the bidder failing to accept or execute the terms of the contract awarded to them. 

Remember that all financial guarantees are structured under secured credit facilities and credit agreements. Obviously the bidder will have to provide assets as security for financial guarantees. Mostly part of the requirements will be that assets provided as security are properly insured and it is usually a condition of the credit facility agreement. 

To learn more about this and many other tender conditions please attend one of our How-to-Tender workshops. For more information on the tender courses please email Werner at werner@how2tender.com

This article was written by Werner van Rooyen, Director of HowToTender (Pty) Ltd. which specializes in tender consulting and tender training.
 

Title Closing Date Tender No.
Appointment of a Professional Consulting Engineer For Planning, Design and Project Management: Refurbishment and Upgrading of Kameelmond Wastewater Treatment Works 2018-10-19 14:00 TN078/2018
Supply and delivery of fittings for MIG water meters project- Brandfort. 2018-09-26 12:00 2018/09/002
Supply and delivery of fittings for MIG water meters project- Winburg. 2018-09-26 12:00 2018/09/004
Supply and delivery of 4 core cables. 2018-09-26 12:00 13/09/2018
Quotation for 3x computer monitors, 3 laptops. 2018-09-26 11:00 KCDM/QUOTE/31/2018
Design, planning and project management of a steel structure with rooftop for the Dawid Kruiper Municipality 2018-10-12 14:00 TN078/2018
Development of an app & social media Platforms. 2018-09-26 11:00 C2/2018
Supply and delivery of digital camera and video camera. 2018-09-25 12:00 IHLM-46/09/2018-19/CS
Supply and delivery of chemicals 2018-09-25 12:00 Q005826
Supply and delivery of dry beans for led projects. 2018-09-25 12:00 Q005828
Supply and delivery of Geopositinal System (GPS) devices. 2018-09-25 12:00 Q005865
Supply and delivery of tools: Electrical Department 2018-09-27 11:00 FQ/SM : 2/19
Area East Career Expo Catering 2018- Exhibitors 2018-09-25 10:00 SM11900107
Supply, delivery and installation of a water flow meter system 2018-10-02 11:00 FQ/SM : 25/19
Consultant required to provide Monitoring, Evaluation, Accountability and Learning (MEAL) technical support to SCSA projects in Gauteng Province 2018-10-04 16:00 No reference number supplied
Supply of Services to Repair Traffic Signals and Associated Equipment within the Breede Valley Municipality 2018-09-27 11:00 288145
Consultancy services for SAP grant management implementation support 2018-10-05 15:00 ET-AUC-78675-CS-QCBS
Supply and Delivery of VBTS Collimator Insulating Piece. 2018-09-25 11:00 Themba LABS – RFQ/2018/19:84
Supply, delivery and Laying of Tiles 2018-09-28 11:00 280918
Procurement of Bus Services for Spring Schools – 4 x 30 Seater Buses. 2018-09-25 11:00 iThemba LABS – RFQ/2018/19:92

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Advantages and disadvantages of Consortiums

Consortiums are often considered as entities to use when responding to tenders in South Africa. The question that arises is whether to use a Consortium or a Joint Venture when responding to a tender. To help you with this we have compiled a list of advantages and disadvantages for both Consortiums as well as Joint Ventures. In this article we list the advantages and disadvantages of Consortiums. Look out for the same article on Joint Ventures.

Consortiums Advantages:

  • Easy to establish as there are no formal procedures... Read More
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