Updated 7 November 2026
Tender security, often called a bid bond, is a guarantee a bidder gives a public procuring entity that it will not withdraw its bid or refuse to sign the contract if it wins. In Kenya, the Public Procurement and Asset Disposal Regulations, 2020 accept four forms: cash, a bank guarantee, a guarantee from a licensed insurer listed by the Public Procurement Regulatory Authority, or a guarantee from a CBK-licensed financial institution. Small firms and AGPO groups bidding for reserved tenders sign a Tender Securing Declaration instead.
Checked on 7 November 2026 against the Public Procurement and Asset Disposal Regulations, 2020 (National Treasury copy), regulations 45, 46, 135 and 155 and the Fourth Schedule, and Co-operative Bank’s published guarantee pricing. The tender document itself sets the amount and form required.
Contents: What it is · Four accepted forms · Bank costs · AGPO declaration · Performance security · Checklist · FAQ
What tender security protects
A procuring entity spends time and money evaluating bids. Tender security gives it something to claim if a bidder walks away during the bid validity period, or wins and then refuses to sign the contract or provide the performance security. If you lose the tender, or win and sign, the security is released according to the tender terms.
The amount and validity period are set in the tender document, so read the tender data sheet first. Regulation 45 applies where the accounting officer requires security under section 61(1) of the Act.
The four accepted forms of tender security
Regulation 45(1) lists them:
- Cash. Simple, but it ties up your working capital until release.
- A bank guarantee. The most common form for larger bids.
- An insurance guarantee from a company registered and licensed by the Insurance Regulatory Authority and listed by the Public Procurement Regulatory Authority. Check that your insurer is on the list before you buy.
- A guarantee from a financial institution approved and licensed by the Central Bank of Kenya.
Regulation 45(2) adds that a bidder cannot issue tender security to guarantee itself.
What a bank bid bond costs
Banks price guarantees as a commission on the amount guaranteed. Co-operative Bank publishes these rates for its MSME customers:
| Guarantee | Co-op Bank published commission |
|---|---|
| Bid bond, unsecured or partly secured | 1% per half-year, minimum KSh 5,000 |
| Bid bond, secured with cash cover | 1% per half-year, minimum KSh 1,000 |
| Other bank guarantees (such as performance bonds) | 2.5% a year, minimum KSh 5,000 |
| Other guarantees, fully cash covered or backed by a first-class bank | 2% a year, minimum KSh 1,000 |
| Amendment to a guarantee | KSh 1,000, plus KSh 1,500 if sent by SWIFT |
Example: a KSh 200,000 unsecured bid bond for up to six months at 1% would cost KSh 2,000, but the KSh 5,000 minimum applies, so you would pay KSh 5,000. Other banks and insurers set their own prices and may ask for collateral, so compare quotes.
The AGPO Tender Securing Declaration
Regulation 155 says no tender security is required from small, micro and medium enterprises or enterprises owned by disadvantaged groups participating in reserved procurement. Instead, they must sign the Tender Securing Declaration Form in the Fourth Schedule.
The declaration is not a free pass. By signing, you accept that you will be suspended from bidding with that entity for a period stated in the form if you withdraw your bid during the validity period, or if you win and fail to sign the contract or provide performance security. Regulation 155(3) adds that a target-group bidder who breaks the declaration is liable for debarment under section 41 of the Act. The declaration expires if you are not the successful bidder when you receive notice of the winner, or 30 days after your tender expires, whichever is earlier.
To bid as a target group, you first need AGPO registration; see our AGPO registration guide and the latest AGPO tenders.
Tender security vs performance security
Tender security covers the bidding stage. Performance security covers the contract itself. Under regulation 135, performance security for goods, works and non-consultancy services applies to contracts above KSh 5 million. Where it is required from women, youth, persons with disabilities and other disadvantaged groups, it cannot exceed 1% of the contract sum. A consultant who provides professional indemnity cover does not need to give performance security.
Tender security checklist
- Confirm the amount, form, wording and validity period in the tender document.
- Get the guarantee in the procuring entity’s required format; wrong wording is a common reason for disqualification.
- Make sure the guarantee is valid for the full bid validity period, plus any extra days required.
- For insurance guarantees, confirm the insurer is on the PPRA list.
- For reserved tenders, sign the Tender Securing Declaration and attach your AGPO certificate.
- Diarise the release date and ask for your guarantee or cash back once the award is made.
If you believe a tender was evaluated unfairly, our guide on filing a request for review with the PPARB explains the deadlines and fees.
Frequently asked questions
What forms of tender security are accepted in Kenya?
Cash, a bank guarantee, a guarantee from a PPRA-listed licensed insurer, or a guarantee from a CBK-licensed financial institution, under regulation 45 of the 2020 regulations.
Do AGPO firms pay tender security?
Not for reserved tenders. They sign a Tender Securing Declaration instead, and breaking it can lead to suspension or debarment.
How much does a bid bond cost at a bank?
It varies by bank. Co-op Bank publishes 1% per half-year for bid bonds, with a minimum of KSh 5,000 if unsecured or KSh 1,000 if cash-secured.
Can my own company guarantee its tender?
No. Regulation 45(2) says a bidder cannot issue tender security to guarantee itself.
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