A guarantee protects the buyer if the contract is not performed. In Bulgaria no guarantee is required for taking part in a procedure – a bid is not secured with money. Guarantees are asked for when the contract is signed.
Performance guarantee
The buyer sets it as a percentage of the contract value, within the maximum allowed by law, and it is provided before signing. It covers penalties and damage in case of non-performance. The terms for withholding and releasing it are in the draft contract – read them before you bid, because afterwards they are not negotiable.
The forms the bidder chooses between:
- A cash sum paid into the buyer's account.
- A bank guarantee – the bank undertakes to pay on demand. It costs a fee but does not tie up working capital.
- An insurance policy securing performance – with some insurers it is cheaper than a bank guarantee.
Check the requirements for the wording of the bank guarantee or the insurance: validity period (usually longer than the contract), unconditional, irrevocable. A guarantee with different wording is sent back for correction, which delays the signing.
Advance payment guarantee
If the contract provides for an advance, it is usually secured with a guarantee for its full amount. It is released in stages as the advance is used. No advance, no such guarantee.
When it is released
The deadlines and conditions are in the contract: after acceptance of the work, after the warranty period ends, in parts after each stage. The buyer has no right to keep the guarantee without grounds, but it is up to you to ask in writing for its release.
Common misunderstandings
- Building the guarantee into the bid price so that the bid stops being competitive. A bank guarantee costs a small part of its amount.
- Providing a guarantee with a shorter validity than required.
- Overlooking that when the contract is extended, the guarantee is extended too.
- Expecting automatic release – ask for it.
The article is general information, not legal advice. The exact percentages and deadlines are always in the documents and the contract of the tender concerned.
Updated on 1 Oct 2026. The article is general information, not legal advice.
