GCC Tender Alerts

Bid bonds and performance guarantees in Saudi and UAE tenders

Government tenders usually ask for a bid bond (initial guarantee) with the offer and a performance bond (final guarantee) after award. Percentages and deadlines differ by jurisdiction. This guide quotes the Saudi Government Tenders and Procurement Law and Dubai Law No. (12) of 2020. [1][2] The UAE government portal says bidders must register on the respective e-procurement system before bidding for government contracts. [3]

By GCC Tender Alerts editorial team · · checked against the official sources below.

The short version

  1. Saudi Arabia (GTPL): submit an initial guarantee of 1% to 2% of the proposal value with the bid, or the proposal is disqualified; after award submit a final guarantee of 5% of the contract value within 15 working days (extendable by the same period). [1]
  2. Dubai government contracts law: the bid bond amount must not exceed 2% of the estimated value of the public tender. [2] A performance bond is generally 10% of the bid value, with listed exemptions and alternatives. [2]
  3. Forms: Saudi law accepts local-bank letters of guarantee (or foreign-bank letters through a local bank). Dubai law accepts cash, certified cheque, or an unconditional irrevocable bank guarantee from a bank operating in the UAE, among other forms the entity may allow. [1][2]
  4. Federal UAE: register on the relevant e-procurement system first before bidding for government contracts. [3]

Saudi Arabia: initial guarantee (bid bond)

Article 41 of the Government Tenders and Procurement Law requires a bidder to submit, along with the proposal, an initial guarantee of 1% to 2% of the value of the proposal. [1] Any proposal submitted without that guarantee is disqualified. [1]

Article 42 lists cases where an initial guarantee is not required: direct purchase; competition; intra-governmental contracts; contracting with a non-governmental organisation or society or non-profit entity; and contracting with local small- and medium-sized enterprises. [1]

If a proposal is withdrawn within the validity period, the law states the initial financial guarantee shall not be returned. [1]

Saudi Arabia: final guarantee (performance bond)

Article 61 requires the awarded bidder to submit a final guarantee of 5% of the contract value within 15 working days from notification of the awarding decision. [1] The government agency may extend that period for a similar period. [1] If the final guarantee is not submitted in time, the initial guarantee is not returned and the agency negotiates with the next best bidder. [1] The guarantee percentage may be increased upon the Minister’s approval. [1]

Local SME bidders pay a fine equal to the initial guarantee if they withdraw during validity or fail to submit the final guarantee when awarded. [1] Failure to pay that fine within 60 days can lead to a one-year ban from contracting with government agencies. [1]

Article 61(3) lists cases where a final guarantee is not required, including when the value of the works and procurements does not exceed 100,000 riyals. [1] The same article also covers intra-government contracts, non-profit counterparts, companies the State owns at least 51% of, and certain delivery or retention situations. [1]

In continuing-services contracts, the final guarantee is reduced annually in proportion to work completed, but must not fall below 5% of the value of the remaining work. [1]

Accepted guarantee forms include a letter of guarantee from a local bank, or from a bank outside the Kingdom submitted through a local bank, on the terms the Regulations set. [1]

Dubai: bid bond rules

Article 31 requires a bid to be accompanied by a bid bond as cash, a certified cheque, or an unconditional and irrevocable bank guarantee issued in favour of the government entity by a bank operating in the UAE, or another guarantee the entity determines. [2] The entity sets the amount, which must not exceed 2% of the estimated value of the public tender. [2]

Exemptions from providing a bid bond include government entities; free-zone or outside-UAE corporations unable to provide bid bonds while the entity has an urgent need; entities exempted by legislation; and entities exempted in whole or in part by the Department of Finance. [2]

The bid bond must be valid from bid submission for at least 30 days after the bid validity expires, and must be extended if bid validity is extended when the entity requests it. [2] It is returned to the successful bidder when the performance bond is received (or when bid validity ends), and to others when the tender is cancelled, bids are disqualified, or the tender is postponed for more than 60 days, as the article states. [2]

Confiscation without notice or judgment applies if the bidder withdraws before award, refuses to extend the bond without an acceptable reason, refuses to sign the contract, or fails to provide the performance bond in time. [2]

Dubai: performance bond rules

Article 40 generally collects an interest-free performance bond of 10% of the bid value as a certified cheque, an unconditional irrevocable bank guarantee from a UAE-operating bank, or another guarantee or percentage the Department of Finance prescribes. [2] Validity is 90 days after contract expiry for supply and services, or until final receipt for works, unless the committee sets another period. [2]

A director general may exempt performance bonds in listed cases, including government suppliers, contracts performed within 30 days (with bid-bond validity extended), certain free-zone or outside-UAE suppliers unable to provide a bond in urgent needs, and contracts not exceeding AED 500,000. [2]

Where the supplier cannot provide a performance bond for acceptable reasons and the contract value exceeds AED 500,000 up to AED 5,000,000, up to 10% of payments owed may be retained instead until final receipt. [2]

Federal UAE tenders

The UAE government portal states that bidders must register on the respective e-procurement system before bidding for government contracts, and that federal suppliers register in the Federal Supplier Register / Digital Procurement Platform. [3] Federal suppliers register in the Federal Supplier Register / Digital Procurement Platform on that portal path. [3]

Practical tips

Questions

What initial guarantee does Saudi law require with a bid?

Article 41 of the Government Tenders and Procurement Law requires an initial guarantee of 1% to 2% of the proposal value submitted with the proposal. [1] Bids without it are disqualified. [1] Article 42 lists exceptions such as direct purchase, competition, intra-governmental contracts, non-profit counterparties and local SMEs. [1] Check which case applies before you omit a guarantee.

How large is the Saudi final guarantee after award?

Article 61 sets the final guarantee at 5% of the contract value, due within 15 working days of award notification, with one possible extension of the same length. [1] Miss that deadline and the initial guarantee is not returned. [1] Continuing-services contracts may reduce the final guarantee annually, but not below 5% of remaining work. [1]

What is the Dubai bid bond limit?

Under Article 31 of Dubai Law No. (12) of 2020, the government entity sets the bid bond amount, which must not exceed 2% of the estimated value of the public tender. [2] Acceptable forms include cash, a certified cheque, or an unconditional irrevocable bank guarantee from a bank operating in the UAE. [2]

What performance bond does Dubai contracts law require?

Article 40 generally requires an interest-free performance bond of 10% of the bid value, valid for 90 days after contract expiry for supply and services or until final receipt for works, unless another period is set. [2] The law also lists exemptions and a retention alternative for certain mid-value contracts when a bond cannot be provided. [2]

Do federal UAE tenders use the same percentages?

The UAE government portal requires registration on the relevant e-procurement system and points federal suppliers to the Federal Supplier Register / Digital Procurement Platform. [3] Saudi and Dubai percentage rules in this guide come from Saudi GTPL and Dubai Law No. (12) of 2020, not from that federal portal page. [1][2][3]

Sources

  1. Saudi Government Tenders and Procurement Law (MoF English PDF)
  2. Dubai Law No. (12) of 2020 concerning contracts and warehouse management (English PDF)
  3. UAE government portal: government tendering and awarding

General information, not legal advice. Portal rules and fees change; the official pages prevail.