Guarantees for Public Tenders and Contracts in Brazil
How the guarantee required in Brazilian public tenders and contracts works: the modalities the tender accepts, the required percentages (generally up to 5%, up to 30% for large works), when to submit it, how the cost is set and how issuance works for ERGO's letter of guarantee (carta fiança).
In Brazilian public tenders and contracts, the tender notice defines the required guarantee and the accepted modalities — generally up to 5% of the contract value (or up to 30% for large-scale engineering works and services with a step-in clause). When the tender accepts the letter of guarantee (carta fiança), it is an alternative to a cash deposit and a bank guarantee, without tying up the company's cash or bank credit line. Acceptance always depends on the tender and the contracting body.
Key facts
- When to submit: At the bid stage (bid guarantee / bid bond) and/or at contract signing and performance (performance guarantee / performance bond), as the tender requires.
- Standard limit: Generally up to 5% of the contract value, as set in the tender by the contracting body.
- Large-scale works: Up to 30% of the contract value when the tender includes a step-in (retomada) clause, for large-scale engineering works and services.
- Step-in clause: A condition in some large-scale tenders: if the contractor defaults, the guarantor takes over completion of the contract object instead of merely paying the guaranteed amount. Check which modalities the tender accepts for this requirement.
- Cost: Quote-based, after analysis, depending on risk, the guaranteed amount, term, modality and the company’s profile. Get your quote online through the app or on WhatsApp +55 11 93444-0099.
- Issuance time: Fast issuance once the documentation is complete, digitally signed with an ICP-Brasil certificate.
Guarantee modalities in public tenders
| Criterion | Cash Deposit | Letter of Guarantee (ERGO) | Bank Guarantee |
|---|---|---|---|
| Consumes cash | Yes — ties up cash | No | No |
| Consumes bank credit line | No | No | Yes — reserves the line |
| How it is issued | Deposit into the account named by the public body | Digital, with an ICP-Brasil certificate, after analysis | By the bank, within the credit line |
| Cost | Opportunity cost of idle capital | Quote-based | Bank fee + reciprocity |
| Recommended | Rarely — locks up cash | Yes, when the tender accepts it — preserves cash and credit line | Only with a spare bank credit line |
Which modalities the tender accepts
The tender notice defines the guarantee: whether it is required, at which stage, at what percentage, and which modalities the public body accepts. The most common modalities are a cash or securities deposit, a bank guarantee, and a guarantee issued by a guarantor, such as the letter of guarantee (carta fiança).
When the tender accepts the letter of guarantee, it is usually the option that best protects the company: it does not tie up cash or consume the bank credit line — two resources essential to carrying out the work or supply.
Before requesting the guarantee, read the tender carefully: the accepted modality, the required wording, the beneficiary, and the term must match the document you will submit. Final acceptance always rests with the contracting body.
Limits and percentages (5% and 30%)
As a general rule, the tender may require a performance guarantee of up to 5% of the initial contract value. This ceiling applies to most supply, service, and ordinary works contracts.
For large-scale engineering works and services, the tender may raise the guarantee to up to 30% of the contract value, provided it includes a step-in (retomada) clause. The higher percentage is the counterpart of the guarantor's commitment to take over completion if the contractor fails.
There is also the bid guarantee (bid bond), required during the tender stage to ensure that the winner signs the contract. The percentage and conditions vary by tender. ERGO's letter of guarantee is issued in the amount, term, and in favor of the beneficiary the tender requires.
The step-in (retomada) clause
The step-in clause appears in tenders for large-scale works. Rather than merely paying the guaranteed amount when the contractor defaults, the guarantor takes over performance of the object — hiring third parties or continuing the work through to completion.
This mechanism (known internationally as step-in) reduces the risk of stalled works and losses to the public interest. Because of this expanded responsibility, such tenders may require a guarantee of up to 30% of the contract value.
If your tender requires a step-in clause, check which modalities it accepts for this requirement and talk to ERGO before preparing your bid: the analysis shows whether the letter of guarantee meets that tender.
How to request the guarantee for a tender
The first step is to read the tender and identify which guarantee is required: bid guarantee (during the tender) and/or performance guarantee (at contract signing), plus the percentage, the accepted modalities, and whether a step-in clause applies.
With this information, the company sends ERGO its corporate and financial documents and the tender itself for analysis. Once approved, the letter of guarantee has fast issuance once the documentation is complete, in the amount and under the conditions the public body requires, digitally signed with an ICP-Brasil certificate.
The letter of guarantee is then submitted to the contracting body as proof of the guarantee, in place of a cash deposit or a bank guarantee. ERGO serves companies in public tenders and contracts and supports every step, from reading the tender to issuance.
Frequently asked questions
Do public tenders accept a letter of guarantee?
It depends on the tender. The tender defines which guarantee modalities the public body accepts, both at the bid stage (bid guarantee) and during contract performance (performance guarantee). When the tender accepts it, ERGO issues the letter of guarantee in the required amount and conditions.
What percentage of guarantee is required?
Generally up to 5% of the contract value, as set in the tender. For large-scale engineering works and services, the percentage can reach up to 30% when the tender includes a step-in (retomada) clause.
What is the step-in (retomada) clause?
It is the condition under which the guarantor takes over and completes the contract object (step-in) if the contractor defaults, instead of only paying the guaranteed amount. It is the counterpart of the up-to-30% limit for large works; check which modalities the tender accepts for this requirement.
Does the letter of guarantee work for both bid and performance?
Yes, when the tender accepts it. ERGO issues both the bid guarantee (bid bond), required at the tender stage, and the performance guarantee (performance bond), required at signing and throughout the contract.
Does the letter of guarantee replace the cash deposit?
When the tender accepts the letter of guarantee, it is submitted in place of a cash deposit or a bank guarantee, without tying up the company's cash or consuming its bank credit line.
How is the cost of a tender guarantee set?
The fee is always quoted after analysis, depending on risk, the guaranteed amount, term, modality and the company’s profile. It is far cheaper than the capital that would sit idle in a cash deposit. Get your quote online through the app or on WhatsApp +55 11 93444-0099.
Bidding on a public tender?
ERGO issues bid and performance letters of guarantee for public tenders and contracts, as the tender requires — preserving your cash and your credit line.