Guarantees for Public Tenders
How ERGO's letter of guarantee (carta fiança) meets the guarantees required in Brazilian 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, companies submit a bid bond (garantia de proposta / licitante) and a performance bond (garantia de execução, up to 5% or 30% with step-in), as the tender requires. When the tender accepts the letter of guarantee (carta fiança), it replaces the cash deposit and frees 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 guarantor takes over and completes the contract if the contractor defaults. Check which modalities the tender accepts for this requirement.
- Acceptance: The tender defines the accepted modalities — generally cash deposit, government bonds, bank guarantee and a guarantee issued by a guarantor, such as the letter of guarantee. Final acceptance rests with the contracting body.
- Cost: Set in the quote, after the risk analysis, according to the guaranteed amount, the term, the modality and the company profile — without consuming the bank credit line. Get your quote online through the app or on WhatsApp +55 11 93444-0099.
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
The tender notice organizes the contract guarantee into two moments. At the tender phase, it 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.
When the tender accepts it, these guarantees can be provided through a letter of guarantee (carta fiança) issued by ERGO — see guarantees for public tenders and contracts —, alongside the other modalities the tender admits, such as a cash deposit, government bonds and a bank guarantee. The letter of guarantee 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 bid bond issued as a letter of guarantee 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 requests 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 guarantor takes over and completes the contract upon default — check which modalities the tender accepts for this requirement. This differs from a performance bond vs payment bond, an important distinction when the contract also involves payment to subcontractors. To understand how the cost is set, see how much a guarantee costs.
How to get the guarantee 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, ERGO runs the analysis and issues the guarantee — a bid bond at the proposal phase and, upon winning, a performance bond at the execution phase.
Issuing the letter of guarantee — see guarantees for public tenders and contracts — is done digitally, signed with an ICP-Brasil certificate, with fast issuance once the documentation is complete. Get your quote online through the app or on WhatsApp +55 11 93444-0099. An ERGO specialist helps you size the guarantee required in your tender.
Frequently asked questions
What guarantees does a public tender require?
Tenders usually provide 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. When the tender accepts it, both can be provided through a letter of guarantee (carta fiança).
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 letter of guarantee replace the cash deposit?
When the tender accepts the letter of guarantee, it is submitted in place of a cash deposit, government bonds or a bank guarantee. Choosing the letter of guarantee avoids tying up the company's cash in a deposit. Acceptance always depends on the tender and the contracting body.
What is the step-in (retomada) clause?
It is the provision, in the performance guarantee, under which the guarantor takes over and completes the contract if the contractor defaults, instead of merely paying the guaranteed amount. When the tender requires this clause, the performance guarantee percentage may reach 30%; check which modalities the tender accepts for this requirement.
How long does it take to issue a tender guarantee?
The letter of guarantee is issued digitally, signed with an ICP-Brasil certificate, with fast issuance once the documentation is complete. Request the guarantee ahead of the qualification and contract-signing timeline.
Are the bid bond and the performance bond the same guarantee?
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 requests 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 letters of guarantee for public tenders, as the tender requires — with agile analysis and without tying up your working capital.