Surety Bonds for Public Tenders
How surety bonds meet Brazilian Law 14.133/2021 in public tenders — the bid bond at the qualification phase and the performance bond at the contractual phase, freeing the cash that a cash deposit would tie up.
To bid on and execute public contracts under Law 14.133/2021, companies use a bid bond (garantia de proposta / licitante) and a performance bond (garantia de execução, up to 5% or 30% with step-in), replacing the cash caução and freeing working capital.
Key facts
- Bid guarantee: Required at the tender phase (bid bond); ensures the winning bidder signs the contract.
- Performance guarantee: Required at the contractual phase (performance bond); ensures proper execution of the object.
- Performance limits: Generally up to 5% of the contract value; up to 10% for large-scale works and up to 30% when a step-in (retomada) clause applies.
- Step-in (retomada) clause: With step-in, the insurer may take over and complete the contract if the contractor defaults.
- Legal acceptance: Law 14.133/2021 accepts the surety bond as a guarantee modality, alongside cash deposit, government bonds and bank guarantee.
- Cost: A surety bond usually costs a fraction of a tied-up cash deposit — typically ~1% to 5% per year on the guaranteed amount, without consuming the bank credit line.
Guarantee by tender phase
| Guarantee | Phase | Typical percentage | What it secures |
|---|---|---|---|
| Bid guarantee (bid bond) | Tender / qualification | Up to 1% of the estimated contract value | That the winning bidder holds its proposal and signs the contract. |
| Performance guarantee (performance bond) | Execution / contract term | Up to 5% (up to 10% for large-scale works; up to 30% with a step-in clause) | Faithful execution of the object, including penalties and, with step-in, completion of the work. |
Guarantees required in tenders (Law 14.133)
Law 14.133/2021 organizes the contract guarantee into two moments. At the tender phase, the tender document may require the bid guarantee (bid bond), which ensures the winning bidder holds its offer and signs the contract. At the contractual phase, the performance guarantee (performance bond) is required, ensuring faithful execution of the object.
All of these guarantees can be provided through a surety bond (Law 14.133), alongside the other accepted modalities — cash deposit, government bonds and bank guarantee. Choosing the surety bond is what lets a company compete and execute without tying up its cash.
Bid bond: proposal phase
The bid guarantee, or bid bond, covers the tender phase. It protects the public body against a bidder who wins and then refuses to sign the contract or fails the qualification conditions. The usual percentage is up to 1% of the estimated contract value, as set by the tender document.
Because it is a small amount with a short term, a surety bid bond is fast to issue and does not require the company to leave cash idle in a deposit just to compete. Upon winning, the company then takes the performance guarantee for the next phase.
Performance bond: execution phase
The performance guarantee, or performance bond, covers the contractual phase: it ensures faithful execution of the object, including penalties and ancillary obligations. The percentage is, as a rule, up to 5% of the contract value, reaching 10% for large-scale works and up to 30% when the tender includes the step-in (retomada) clause.
With the step-in clause, the insurer may take over and complete the contract upon default — which differs from a performance bond vs payment bond, an important distinction when the contract also involves payment to subcontractors. To size the investment, see how much a surety bond costs.
How to get covered fast for a tender
Gather the tender document, the object and the estimated contract value, along with the company's corporate and financial records. With that, the insurer runs the risk analysis and issues the guarantee — a bid bond at the proposal phase and, upon winning, a performance bond at the execution phase.
Issuing the surety bond (Law 14.133) usually takes 24 to 72 hours after documentation, compatible with qualification timelines. Request a quote below and talk to an ERGO specialist to size the guarantee required in your tender.
Frequently asked questions
What guarantees does Law 14.133 require?
Law 14.133/2021 provides for two distinct guarantees: the bid guarantee (bid bond), required at the tender phase to ensure the winner signs the contract, and the performance guarantee (performance bond), required at the contractual phase to ensure proper execution. Both can be provided through a surety bond.
What is the percentage of the performance guarantee?
As a rule, up to 5% of the contract value. For large-scale engineering works and services, it may reach 10%. When the tender document includes a step-in (retomada) clause, the performance guarantee may be required at up to 30% of the contract value.
Does a surety bond replace the cash deposit?
Yes. Law 14.133/2021 accepts the surety bond as a contractual guarantee modality, on equal footing with a cash deposit, government bonds and a bank guarantee. Choosing the surety bond avoids tying up the company's cash in a deposit.
What is the step-in (retomada) clause?
It is the provision, in the performance guarantee, allowing the insurer to take over and complete the contract if the contractor defaults, instead of merely paying an indemnity. When the tender requires this clause, the performance guarantee percentage may reach 30%.
How long does it take to issue a tender guarantee?
After risk analysis and documentation, a surety bond is usually issued within 24 to 72 hours — compatible with most qualification and contract-signing timelines.
Are the bid bond and the performance bond the same policy?
No. They cover different phases: the bid bond covers the proposal phase (signing the contract) and the performance bond covers the execution phase (delivering the object). The same company usually takes a bid bond to compete and, upon winning, a performance bond to execute.
Need a tender guarantee without tying up your cash?
ERGO issues bid and performance guarantees for public tenders under Law 14.133/2021 — with agile analysis and without tying up your working capital.