Security Deposit in Procurement Law 2026
Security deposit in procurement law: security provided by a bidder or contractor to safeguard the claims of the public contracting authority.
Definition: In a procurement-law context, a security deposit is a form of security provided by a bidder or contractor to the public contracting authority to safeguard claims relating to contract performance, warranty or other matters; it may be provided in cash, by way of a bank guarantee or by other suitable means of security.
Last updated: January 2026 · Legal status: VOB/B § 17; ÖNORM B 2110; BVergG 2018; ZPO
What is a security deposit in procurement law?
A security deposit is a safeguarding instrument in procurement law that protects the contracting authority against losses caused by defective or non-performance. Unlike the bid bond (Vadium), which secures the seriousness of a bid, the security deposit typically relates to the phase following the award of the contract.
In Austrian procurement practice, the term "Kaution" (security deposit) is often used as a synonym for security in general, whereas in German law the term is encountered less frequently in procurement law and tends to be replaced by more specific terms such as "performance bond" (Vertragserfüllungsbürgschaft), "warranty bond" (Gewährleistungsbürgschaft) or "retention" (Deckungsrücklass).
Types of security
Procurement law distinguishes between various forms of security, each safeguarding different risks.
- Bid bond/Vadium: secures the bidder's commitment to its bid (bidding phase)
- Performance bond: secures proper performance of the contract (execution phase)
- Warranty retention/warranty bond: secures claims for defects (warranty phase)
- Cover retention: withholding of part of the remuneration as security
Legal basis
The requirements applicable to security are governed by the relevant procurement and contract-law instruments.
In Austria, ÖNORM B 2110 (General Contract Provisions) contains rules on security. In Germany, § 17 VOB/B governs security for construction works. The requirement for security by the contracting authority must be communicated transparently in the procurement documents.
Related terms
FAQ
May a contracting authority require security of any amount? No. Security must be proportionate and must not serve to exclude smaller companies from participation. Under the VOB/B, security for contract performance is limited to 5 % of the contract value.
In what form can security be provided? The usual forms are a cash deposit, a bank guarantee or a surety bond from an insurer. The procurement documents specify the permissible forms.
Last updated: January 2026 All information is provided without warranty. For legally binding advice, please consult a law firm specialising in procurement law.
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