Understanding Bid Validity and the Bid Validity Period

1. What is bid validity?

When a bidder submits a bid or proposal in response to an invitation for bids or a request for proposals, they need to commit to their bid (this is done on the bid or proposal submission form) and also to how long the bid/proposal can be considered effective (this is what is commonly called the  bid or proposal validity period). For the sake of simplicity and to avoid unnecessary repetition, we will refer from this point forward only to “bid validity”, but it must be understood that we are referring to the validity of a bidder’s offer, be it a bid or a proposal.

The bid validity period is the period within which a bidder agrees to keep their offer legally binding. During the bid validity period, if the bidder decides to withdraw their bid or not to sign the contract, if selected, the bidder’s bid security (if one was required) would be forfeited or in the case of a bid securing declaration, a penalty would be imposed on the bidder as specified in the bidding documents.

2. What is the purpose of the bid validity period?

The purpose of the bid validity period is for bidders to commit to not modify or withdraw their bid for a specified period. The period of bid validity must be clearly stated in the bidding documents. The bid validity period is usually calculated to extend from the bid opening date up to the date when the contract is signed.

In addition to the period from the opening of bids to contract signing, more days are added to ensure the bid is valid up to the point when all guarantees that were stipulated in the bidding documents are received. In cases where a performance guarantee is required before contract commencement, a specific number of days are added to the bid validity period to allow sufficient time for the selected bidder to obtain and submit a bank guarantee, bond or any other guarantee (advance payment guarantee) as may be required before they sign the contract.

3. What is the bid validity period used for?

As mentioned above, the purpose of the bid validity period is for bidders to commit to keeping their bid legally binding for a specific number of days in order to assure the purchaser that there will be no modification of their bid during the specified period. Therefore, it is important for the purchaser to complete the selection process and sign the contract within the bid validity period.

4. How is the bid validity period calculated?

To calculate the bid validity period, one needs to have a good idea of how long it will take from the bid submission or bid opening date (as would be indicated in the bidding documents) until the contract is signed. This period must be carefully estimated to minimize the need to extend the bid validity; consequently, it is important to know the procurement timeline of the procurement method used and to cautiously manage the risks associated with the completion of the evaluation process, including the period for evaluation of bids and time taken by the approving authority to review and approve the evaluation report.

For small procurements, the bid validity period may be 30 to 60 days. For more complex procurements, it can be 90 days or more, depending on how long it is estimated to take from the bid opening date until the contract is signed. It is important to thoughtfully calculate the bid validity period in order to complete the process before it expires and avoid the need to request an extension of the validity period.

5. What happens when the bid validity period is about to expire?

If it is anticipated that the contract will not be signed before the bid validity period expires, bidders should be formally requested to consider extending their bid validity cheska-lekarna.com. When this happens, bidders have the right to accept or reject, without penalty of losing their bid security, and they may be permitted to change their bid price if this was indicated in the bidding documents.

When a bidder receives a formal request from the procuring entity to extend their bid validity, they may, if expressly stipulated in the bidding documents:

1. Extend the bid validity (and bid security) for the period requested with no change in their price;
2. Extend the bid validity (and bid security) for the period requested with a change in their bid price; or
3. Reject the request for bid validity extension and just withdraw their bid.

A request for bid validity extension may also have cost implications for bidders if they were required to submit a bid security with a corresponding bank guarantee. In this case, bidders would likely incur bank charges to extend their bid security, so they need to take that into consideration, and their chances of winning the bid, before they agree to extend their bid validity.

The need for a bid validity extension should be avoided because of the risk of price increase or withdrawal of bids, which may delay the bidding process or cause it to fail, with adverse impact on the delivery of services to end users.