In an effort to provide some relief to ailing contractors and OEMs reeling under some financial stress because of the Covid-19 Pandemic, Government of Haryana has implemented reduction in the performance security deposit required in various government contracts.
Performance security deposit used to be between 5 to 10% of total contract value. This has now been reduced to between 0.2 to 3% of contract value.
Background of Reduced Performance Security Deposit
Department of Expenditure (Procurement Policy Division) under Union Ministry of Finance, in an order dated 12.11.2020 mentioned that there has been a slowdown in economy due to pandemic which has led many economic entities and contractors towards financial crunch. This in turn has an adverse impact on timely completion of contracts. Considering this the Government of India had reduced Performance Security Deposits from existing 5-10% to 3% of contract value with some specific provisions.
State Government of Haryana agreeing with Centre’s initiative, issued instructions vide memo to various departments dated 14.12.2020 via Director General, Supplies and Disposal Department, Government of Haryana.
Specifics of the Order for Reduced Performance Deposit
Departments under the Haryana Government thus circulated office orders to realize the reduced performance security deposit criteria. Departments releasing this order included Haryana Vidyut Prasaran Nigam Limited (HVPNL), Dakshin Haryana Bijli Vitran Nigam Limited (DHBVN), Uttar Haryana Bijli Vitran Nigam Limited (UHBVN), Supplies and Disposals Department Haryana etc. to name a few.
The detailed clauses are as below:
- Haryana based Micro and Small Enterprises (MSEs) will have to deposit only 0.2 percent of the contract value.
- Other Haryana based firms / enterprises will be required to deposit 2% of the contract value.
- Firms based in other states and Union territories will have to deposit 3 percent of the contract value.
All contracts / tenders issued or concluded upto 31 December 2021 will be eligible for above concessions, except any contracts under dispute. In addition all contracts where reduced percentage of performance security is applied shall continue at the same amount for the entire duration of contract and there shall be no subsequent increase in Performance Security beyond 31.12.2021.