Bid Bond (Kenya)
BID BOND (TENDER GUARANTEE)
Public Procurement and Asset Disposal Act No. 33 of 2015 | PPRA Standard Tender Documents
Bond Reference: [Bond Reference Number]
Date: [Bond Date]
ISSUER (GUARANTOR):
[Issuer Name] (Licence No: [Issuer Licence Number]), of [Issuer Address] ("the Bank")
PRINCIPAL (TENDERER):
[Tenderer Name] (BRS No: [Tenderer BRS Number]), of [Tenderer Address] ("the Tenderer")
BENEFICIARY (PROCURING ENTITY):
[Beneficiary Name], of [Beneficiary Address] ("the Procuring Entity")
GUARANTEE UNDERTAKING
WHEREAS the Tenderer has submitted a tender in response to: [Tender Reference];
AND WHEREAS the Procuring Entity requires the Tenderer to provide a Bid Bond (Tender Guarantee) as security for the Tenderer's obligations in the tendering process under the Public Procurement and Asset Disposal Act No. 33 of 2015 and the Public Procurement and Asset Disposal Regulations, 2020;
NOW THEREFORE we, [Issuer Name], hereby irrevocably and unconditionally undertake to pay to the Procuring Entity, on its first written demand, the sum of [Bond Amount] (the "Bond Amount"), without the Procuring Entity being required to prove or show grounds or reasons for such demand, upon receipt of a written demand from the Procuring Entity stating that one or more of the following trigger conditions has occurred:
(a) The Tenderer has withdrawn its tender after the deadline for submission of tenders but before the expiry of the tender validity period stated in the Instructions to Tenderers;
(b) The Tenderer has refused to sign the contract within the period specified in the Letter of Award, having been notified that it is the successful tenderer;
(c) The Tenderer has failed to submit the Performance Bond in the amount and form required within the period specified in the Letter of Award;
(d) The Tenderer has provided false or materially misleading information in its tender submission.
VALIDITY AND RETURN
This Bid Bond shall remain valid and enforceable until [Bond Expiry Date], being 28 days beyond the tender validity period ending on [Tender Validity Date], as required by the PPRA Standard Tender Documents.
Any demand under this Bid Bond must be received by [Issuer Name] at [Issuer Address] on or before [Bond Expiry Date]. Any demand received after that date shall have no effect, and this undertaking shall automatically lapse.
This Bid Bond shall be returned to the Tenderer: (a) within 28 days of tender award for unsuccessful tenderers; and (b) promptly upon the successful tenderer signing the contract and submitting the Performance Bond.
This Bid Bond is issued as a demand guarantee consistent with the principles of the Uniform Rules for Demand Guarantees (URDG 758) of the International Chamber of Commerce (ICC), to the extent not inconsistent with Kenyan law. It is governed by the laws of Kenya.
Issued by [Issuer Name] on [Bond Date].
Authorised Signatory (Issuing Bank / Insurer)
________________
Signature
Witness
________________
Signature
What Is a Bid Bond (Kenya)?
A Bid Bond in Kenya sets out the bid bond and the obligations it places on the parties.
The Public Procurement and Asset Disposal Act No. 33 of 2015 (PPADA) and the Public Procurement and Asset Disposal Regulations, 2020 govern all public procurement in Kenya. The Public Procurement Regulatory Authority (PPRA), established under Section 9 of the PPADA, oversees compliance with procurement procedures and issues standard tender documents and Bid Bond formats that procuring entities must use. The PPRA's Standard Tender Documents (STDs) for Works, Goods, and Services each contain a prescribed Bid Bond format that tenderers and their financial institutions must follow.
A Bid Bond in Kenya is classified as a demand guarantee — an autonomous undertaking of the issuing bank or insurer to pay the beneficiary (the procuring entity) on first written demand, without the need to prove the tenderer's default in court. This autonomy principle, recognised by the High Court of Kenya's Commercial Division and endorsed by the PPRA STDs, is consistent with the Uniform Rules for Demand Guarantees (URDG 758) of the International Chamber of Commerce (ICC).
The Kenya Revenue Authority (KRA) and other government agencies also use Bid Bonds for their own procurement processes under their respective institutional procurement frameworks. County governments conduct procurement under the County Governments Act No. 17 of 2012 and the PPADA, and similarly require Bid Bonds for contracts above specified thresholds set by the respective County Treasury.
A Bid Bond differs from a Performance Bond — which secures performance of the awarded contract — and from a Retention Bond — which replaces cash retention withheld during construction. The Bid Bond is specifically tied to the tendering phase and expires when the Bid Bond is returned, the Performance Bond is submitted, or the tender lapses, whichever is earliest. Insurance companies licensed by the Insurance Regulatory Authority (IRA) under the Insurance Act (Cap. 487) may also issue Bid Bonds in Kenya, subject to the PPRA's acceptance criteria. Under Kenya law, Section 3 of the Companies Act 2015 (No. 17 of 2015) and Section 2 of the Law of Contract Act (Cap 23) govern the core requirements for this type of document.
The legal framework governing the Bid Bond (Kenya) in Kenya draws on several key statutes and regulatory bodies. Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010. Parties executing a Bid Bond (Kenya) in Kenya should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Public Procurement and Asset Disposal Act No. 33 of 2015 sets the foundational requirements.
When Do You Need a Bid Bond (Kenya)?
A Bid Bond in Kenya is required in specific public and private procurement contexts.
A Bid Bond is required for all competitive tenders above the threshold prescribed by the Public Procurement Regulatory Authority (PPRA) under the Public Procurement and Asset Disposal Act No. 33 of 2015. As of the Public Procurement and Asset Disposal Regulations, 2020, a Bid Bond is mandatory for open tenders for works contracts exceeding KES 5 million, goods contracts exceeding KES 3 million, and consultancy contracts above specified thresholds. The Bid Bond amount is prescribed in the tender documents — typically 1% to 2% of the estimated contract value.
A Bid Bond is needed when a company bids for a contract with a state corporation, county government, or national government ministry. Each procuring entity issues its own tender documents based on the PPRA Standard Tender Documents (STDs), which specify the required Bid Bond amount, form, and validity period — usually 28 to 30 days beyond the tender validity period.
A Bid Bond is required when a contractor or supplier participates in an international competitive bid organised by a Kenya government entity or funded by a multilateral development bank such as the World Bank (through its procurement regulations) or the African Development Bank (AfDB), where the procurement threshold and bond requirements are typically higher than domestic thresholds.
A Bid Bond is needed for private sector procurement by large corporations and developers — particularly in the construction, infrastructure, and oil and gas sectors — who adopt procurement processes modelled on the PPADA framework and require Bid Bonds as a screening mechanism to exclude non-serious bidders.
A Bid Bond is required when a tenderer submits an alternative bid or a variant proposal in addition to the main bid — some procuring entities require a separate Bid Bond for each variant to secure each potential contractual commitment independently. Under Kenya law, Section 3 of the Companies Act 2015 (No. 17 of 2015) and Section 2 of the Law of Contract Act (Cap 23) govern the core requirements for this type of document.
What to Include in Your Bid Bond (Kenya)
A Kenya Bid Bond must include the following essential elements to comply with the Public Procurement and Asset Disposal Act No. 33 of 2015, the PPRA Standard Tender Documents, and the standards expected by procuring entities.
Issuer Details: The full name of the issuing bank (CBK-licensed under the Banking Act Cap. 488) or insurance company (IRA-licensed under the Insurance Act Cap. 487), its registered address, and its CBK or IRA licence number. Procuring entities commonly maintain lists of approved financial institutions for Bid Bond purposes — tenderers should confirm the issuing institution is on the procuring entity's approved list.
Tenderer (Principal) Details: Full legal name, BRS registration number, and registered address of the company submitting the bid. The tenderer's name in the Bid Bond must exactly match the name in the tender submission — any discrepancy may lead to rejection of the bond.
Procuring Entity (Beneficiary) Details: Full name, address, and contact details of the procuring entity — for example, the Kenya National Highways Authority (KeNHA), a county government, or a state corporation.
Tender Reference: The tender number and description of the subject matter — for example, "Open Tender No. KeNHA/RD/2025/015 for the Construction and Rehabilitation of Road A1, Section 3, Nakuru County, Kenya." The PPRA Standard Tender Documents require the tender reference to be prominently stated.
Bond Amount: The Bid Bond amount in Kenya Shillings (KES), stated in both numerals and words, as specified in the tender documents. Bid Bond amounts are fixed by the procuring entity and non-negotiable.
Validity Period: The expiry date of the Bid Bond — the PPRA STDs require the Bid Bond to remain valid for 28 to 30 days beyond the tender validity period. The tender validity period is stated in the Instructions to Tenderers (ITT) section of the tender documents.
Demand Triggers: The specific circumstances in which the procuring entity may call on the bond — typically: (a) the tenderer withdraws its bid during the tender validity period; (b) the tenderer refuses to sign the contract after being awarded the tender; (c) the tenderer fails to submit the Performance Bond within the time specified in the contract; or (d) the tenderer provides false or misleading information in its tender. The triggers must match those prescribed in the PPRA STDs.
Return and Release: Conditions under which the Bid Bond will be returned — promptly after contract signing and submission of the Performance Bond by the successful tenderer, and within 28 days of tender award for unsuccessful tenderers.
The forms-legal.com Bid Bond template follows the PPRA Standard Tender Document format and covers all 8 elements required by the Public Procurement and Asset Disposal Act No. 33 of 2015. Tenderers who win contracts should also prepare a Bank Guarantee as the Performance Bond required by the PPRA STDs. Under Kenya law, Section 135 of the Companies Act 2015 (No. 17 of 2015) and Section 2 of the Law of Contract Act (Cap 23) govern the core requirements for this type of document. Under Kenya law, Section 15 of the Employment Act 2007 (No. 11 of 2007) and Section 24 of the Land Registration Act 2012 (No. 3 of 2012) govern the core requirements for this type of document.
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howpublished = {\url{https://forms-legal.com/kenya/business/contracts/bid-bond-kenya}},
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}Also available for these jurisdictions:
Frequently Asked Questions
The Bid Bond amount for Kenya public tenders is prescribed by the procuring entity in the tender documents, within the range authorised by the Public Procurement Regulatory Authority (PPRA) under the Public Procurement and Asset Disposal Regulations, 2020. For works contracts, the Bid Bond is typically set at 1% to 2% of the estimated contract value. For goods contracts, the range is similar. The exact percentage is fixed by the procuring entity in the Instructions to Tenderers (ITT) section of the Standard Tender Documents and cannot be altered by the tenderer. Procuring entities must not set Bid Bond amounts above the PPRA-prescribed range, as this would constitute a barrier to competition under the PPADA's principles of transparency and competition. The Bid Bond amount must be paid in full — partial bonds or bonds for less than the specified amount are rejected as non-responsive bids under the PPRA evaluation criteria. County governments apply the same PPRADA framework for their procurement, meaning county tender Bid Bond requirements are consistent with national government standards.
Yes, insurance companies licensed by the Insurance Regulatory Authority (IRA) under the Insurance Act (Cap. 487) can issue Bid Bonds in Kenya, provided the procuring entity's tender documents accept insurance company bonds in addition to bank guarantees. The PPRA Standard Tender Documents for certain categories of procurement specify acceptable issuers — some STDs accept both banks and insurance companies, while others restrict Bid Bonds to CBK-licensed commercial banks. Where insurance bonds are accepted, the IRA-licensed insurer issues a surety bond rather than a demand guarantee — the legal structure differs slightly from a bank guarantee, as surety bonds may give the insurer a right to investigate the claim before paying. Tenderers should check the tender documents carefully and confirm with the procuring entity before obtaining a Bid Bond from an insurance company. Major insurance companies in Kenya that issue surety bonds include Kenya Re, Jubilee Insurance, and CIC Insurance Group, all regulated by the Insurance Regulatory Authority (IRA).
If a tenderer's Bid Bond expires before the tender is awarded in Kenya, the procuring entity will typically either reject the expired bid as non-responsive under the PPRA evaluation criteria or request the tenderer to extend both the bid validity and the Bid Bond. Under the PPRA Standard Tender Documents, procuring entities may request tenderers to extend their bids and Bid Bonds for an additional period — typically 28 days at a time — before the original validity expires. Tenderers are not obligated to agree, but refusal to extend is treated as withdrawal of the bid. If a tenderer's Bid Bond lapses without extension, the procuring entity's security over the bid is lost. Tenderers must actively monitor their Bid Bond validity dates and obtain extensions from their bank or insurer before expiry if the tender evaluation process is delayed. The procuring entity must give reasonable notice of the extension request under the PPRA Regulations — typically at least 7 days before the expiry date.
Under the Public Procurement and Asset Disposal Act No. 33 of 2015 and the PPRA Standard Tender Documents, a procuring entity must return Bid Bonds to unsuccessful tenderers promptly after the tender award — typically within 28 days of the award notification. The successful tenderer's Bid Bond is returned after the tenderer signs the contract and submits the Performance Bond in the form and amount specified in the tender documents. Procuring entities that retain Bid Bonds beyond these periods without cause expose themselves to complaints before the Public Procurement Regulatory Authority (PPRA) and judicial review before the High Court of Kenya. Under the PPDA, tenderers may lodge a review application with the PPRA Review Board if they believe the procuring entity has acted improperly in relation to their tender, including improper withholding of the Bid Bond. The PPRA Review Board's decisions are subject to appeal to the High Court of Kenya.
No — a Bid Bond and a Performance Bond are distinct instruments serving different purposes under Kenya's public procurement framework. A Bid Bond (also called a tender guarantee or tender security) is issued at the tendering stage to protect the procuring entity against a tenderer who wins the tender but refuses to sign the contract or fails to submit the Performance Bond. The Bid Bond is typically 1% to 2% of the estimated contract value and expires shortly after contract award. A Performance Bond, by contrast, is issued after contract award by the successful tenderer to secure the contractor's performance throughout the contract period — typically equal to 10% of the contract sum under PPRA Standard Tender Documents for works contracts. The Performance Bond expires on issuance of the completion certificate or practical completion. Both instruments are demand guarantees under the Banking Act (Cap. 488) and the Law of Contract Act (Cap. 23), but they are triggered by different events, cover different amounts, and have different validity periods. Contractors must replace the Bid Bond with the Performance Bond within the period specified in the Letter of Award — typically 14 to 28 days.
No. Under the Public Procurement and Asset Disposal Act No. 33 of 2015 and the PPRA Standard Tender Documents, a procuring entity may only call on a Bid Bond in the specific circumstances prescribed in the bond instrument — typically when the tenderer withdraws its bid during the validity period, refuses to sign the awarded contract, fails to submit the Performance Bond, or provides false information in its tender. A procuring entity that calls a Bid Bond without one of these triggers occurring acts unlawfully and exposes itself to a judicial review application before the High Court of Kenya and a complaint to the PPRA Review Board. In practice, the PPRA Standard Tender Document form of Bid Bond requires the beneficiary (procuring entity) to state in its demand which specific trigger condition has been met — a demand that does not identify the trigger condition may be treated as non-compliant by the issuing bank, which is entitled under the demand guarantee principles (and URDG 758 where incorporated) to verify that the demand is formally compliant before paying. Tenderers who believe a Bid Bond has been called without cause should immediately seek injunctive relief from the High Court of Kenya to prevent the bank paying out.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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