Introduction
Tender security and performance bonds are among the most important legal and financial instruments in Turkish public procurement law. Every company participating in public tenders in Turkey must understand how guarantees work, when they are required, which forms are accepted, how they must be submitted, when they are returned and under which circumstances they may be forfeited.
In Turkish public procurement practice, guarantees are not merely financial formalities. They directly affect the validity of the bid, the bidder’s eligibility, the contract signing process, the contractor’s performance obligations and the risk of exclusion from the tender. A bidder may submit the most competitive price and technically compliant offer, but if the tender security is missing, insufficient, expired, issued in the wrong form or submitted incorrectly through EKAP, the bid may be excluded from evaluation.
The main legal framework is based on Public Procurement Law No. 4734 and Public Procurement Contracts Law No. 4735. Law No. 4734 regulates the tender phase, including tender security and performance bond requirements before contract signing. Law No. 4735 regulates the contract performance phase, including additional performance bonds, return of guarantees, set-off against debts and contract termination consequences.
For Turkish and foreign companies, understanding guarantee obligations is essential before participating in public tenders. Tender security and performance bonds affect banking capacity, cash flow, project financing, bid strategy, contract performance and legal risk management.
What Is Tender Security in Turkish Public Procurement?
Tender security, also known as temporary guarantee, is a guarantee submitted by bidders during the tender phase. Its purpose is to protect the contracting authority against certain risks before the contract is signed. For example, if the successful bidder refuses to sign the contract, fails to provide the performance bond or fails to fulfil its contract-signing obligations, the tender security may be forfeited.
Under Article 33 of Law No. 4734, tender security must be provided in an amount determined by the tenderer, but it cannot be less than 3% of the tender price. In consultancy services, tender security is not compulsory if this is stated in the tender documents.
This rule gives bidders some flexibility because the law sets a minimum amount rather than a fixed amount for all tenders. However, the bidder must always check the administrative specification. If the tender documents require a specific format, validity period or submission method, the bidder must comply strictly.
A common mistake is treating tender security as a banking issue only. In reality, it is also a procurement-law issue. The amount, form, validity period and submission method must all comply with Law No. 4734, the tender documents and Public Procurement Authority rules.
Values Accepted as Tender Security
Article 34 of Law No. 4734 lists the values accepted as tender security. These include current Turkish lira, letters of guarantee from banks and special financing institutions, and domestic borrowing bills issued by the Treasury or documents replacing such bills. The law also recognizes certain letters of guarantee arranged by foreign banks permitted to operate in Turkey, and letters of guarantee arranged by banks or special financing institutions operating in Turkey based on counter-guarantees from foreign banks or similar foreign credit institutions.
This is particularly important for foreign companies. A foreign bank guarantee may not automatically be accepted in a Turkish public tender. The bidder must check whether the foreign bank is permitted to operate in Turkey or whether a Turkish bank must issue the guarantee based on a counter-guarantee from the foreign bank.
The law also provides that securities other than letters of guarantee are not received directly by tender commissions; such securities must be deposited with accounting offices or departments. Tender securities cannot be attached or made subject to precautionary measures.
For bidders, the practical lesson is clear: the guarantee must be prepared in the legally accepted form. A commercially valid guarantee in another jurisdiction may still be non-compliant under Turkish public procurement law.
Guarantee Letters and Validity Periods
Guarantee letters are one of the most frequently used forms of tender security and performance bond in Turkey. Article 35 of Law No. 4734 authorizes the Public Procurement Authority to determine the form and scope of guarantee letters. The same provision states that the period of preliminary letters of guarantee must be at least 30 days longer than the tender validity period. If the tender validity period is extended, the guarantee period must also be extended accordingly. The validity of performance bonds is determined by the contracting authority by taking into account the completion date of the procured work.
This is a frequent source of tender disputes. If the guarantee letter’s validity period is shorter than required, the bid may be rejected. If the tender validity period is extended and the bidder fails to extend the guarantee, the bidder may face legal consequences. Therefore, bidders must monitor both the tender validity period and the guarantee validity period.
A guarantee letter should also comply with the standard forms determined by the Public Procurement Authority. The wording must be checked carefully. Minor wording differences may create major legal risks if they affect unconditional payment, duration, beneficiary, tender registration number, amount or legal enforceability.
Tender Security at Bid Submission Stage
Tender security is part of the bid submission package. Article 30 of Law No. 4734 provides that all documents required under participation rules, including the tender letter and tender security, must be placed in the bid envelope in physical procedures. In electronic procurement, equivalent submission rules apply through EKAP and relevant electronic forms.
At the bid opening stage, the tender commission checks whether documents are complete and whether the tender letter and preliminary guarantee comply with the required procedures. Bidders with incomplete documents or improper tender letters and tender securities are recorded in the minutes.
This makes tender security a threshold issue. If the tender security is defective, the bid may not proceed to substantive evaluation. The contracting authority may not even reach the technical or financial merits of the offer.
For this reason, companies should prepare a guarantee checklist before bid submission. This checklist should include the guarantee amount, currency, validity period, issuing institution, wording, tender registration number, beneficiary, electronic reference, submission channel and consistency with the administrative specification.
Return of Tender Security
Article 34 of Law No. 4734 provides that the letters of guarantee belonging to the successful tenderer and the tenderer submitting the second economically most advantageous offer are submitted to accounting offices or departments after the tender proceedings. The tender securities of other participants are returned promptly. If a contract is signed with the successful tenderer, the guarantee of the second economically most advantageous tenderer is returned immediately after contract signing.
This rule is important for cash flow and banking capacity. Companies participating in multiple public tenders may have significant bank guarantee exposure. Prompt return of tender securities for unsuccessful bidders helps release banking limits and financial resources.
However, the successful bidder’s tender security is not returned immediately after the award decision. It is generally returned after the contract is signed and the performance bond is submitted. This ensures that the successful bidder does not walk away from the tender without consequence.
What Is a Performance Bond?
A performance bond is a guarantee submitted by the successful tenderer before signing the public procurement contract. Its purpose is to ensure that the contractor performs the work in accordance with the contract and tender documents.
Article 43 of Law No. 4734 provides that a performance bond calculated as 6% of the contract value must be taken from the successful tenderer before contract signing. The purpose is to secure proper performance of the contractual commitment.
Performance bonds are therefore different from tender security. Tender security protects the contracting authority during the tender and contract-signing phase. The performance bond protects the contracting authority during the contract performance phase.
For bidders, this distinction matters financially. A company should not submit a bid unless it knows that it can provide the required performance bond if it wins. Failure to provide the performance bond may lead to forfeiture of tender security and loss of the contract opportunity.
Invitation to Contract Signing and Performance Bond Deadline
After the tender is finalized and legal waiting periods are completed, the successful tenderer is invited to sign the contract. Article 42 of Law No. 4734 provides that the successful tenderer is notified to sign the contract by issuing a performance bond within ten days following notification. For foreign tenderers, twelve days are added to this period.
This additional period for foreign tenderers is important because foreign companies may need more time for banking arrangements, legalization, internal approvals and cross-border communication. However, foreign bidders should not rely solely on this additional time. Bank guarantee preparation can take longer than expected, especially where counter-guarantees, Turkish bank involvement or foreign currency guarantees are involved.
The bidder should arrange banking facilities before the tender result is announced. Waiting until the invitation to contract signing may create serious risk.
Failure to Provide Performance Bond or Sign the Contract
Article 44 of Law No. 4734 states that the successful tenderer is obliged to sign the contract after submitting the performance bond. After the contract is signed, the tender security is returned. If the successful tenderer fails to fulfil these obligations, its tender security is recorded as revenue without further legal action. In that case, the contracting authority may sign the contract with the second economically most advantageous tenderer if the price is found appropriate.
This is one of the most serious risks in Turkish public procurement. A successful bidder that fails to provide the performance bond or sign the contract may lose its tender security. If the second tenderer also refuses to sign, that tenderer’s security may also be recorded as revenue and the tender may be cancelled.
Therefore, bidders must ensure before submission that they can comply with contract-signing obligations. A low bid that cannot be financially supported by a performance bond may create immediate loss.
Performance Bonds in Consultancy Services
Law No. 4734 contains a special rule for consultancy services. Article 43 states that, if specified in the tender documents, a performance bond may not be taken before contract signing in consultancy service procurements. In such cases, a deduction of 6% from each progress payment is retained as guarantee.
This rule reflects the different nature of consultancy services. However, it applies only where the tender documents provide for it. Consultancy firms should not assume that no performance bond will be required. They must check the administrative specification and draft contract.
Where deductions from progress payments are used instead of a pre-contract performance bond, contractors should consider the effect on cash flow. A 6% deduction from progress payments may reduce available working capital throughout performance.
Tender Security and Performance Bond in Tender Documents
Tender security and performance bond requirements must be stated in the tender documents. Article 27 of Law No. 4734 provides that administrative specifications must include the amount and terms of tender security and performance bond, along with other essential matters such as tender type, contract type, delivery terms, delay penalties, payment conditions and price difference rules.
This means that bidders should review the administrative specification carefully before submitting a bid. The law sets general rules, but tender-specific details are usually found in the tender documents. These may include the guarantee amount, accepted forms, validity period, electronic submission method, performance bond rules, additional bond requirements and return conditions.
If the tender document contains unlawful or unclear guarantee requirements, the bidder should consider filing a complaint before the tender deadline. Waiting until after the tender result may be too late.
Public Procurement Contracts Law No. 4735 and Performance Bond Rules
Once the contract is signed, Law No. 4735 becomes highly important. Law No. 4735 states that public procurement contracts cannot contain provisions contrary to tender documents and, except in legally specified cases, contract provisions cannot be changed and additional contracts cannot be executed.
This principle affects guarantee obligations. The contractor cannot usually renegotiate performance bond conditions after winning the tender. If the tender documents and contract require a specific guarantee structure, the contractor is bound by that structure.
Law No. 4735 also requires public procurement contracts to include the amount of performance bond and the conditions for its return. It further requires the contract to include warranty conditions, delivery and acceptance rules, delay penalties, force majeure, inspection and acceptance, contract amendment and termination provisions.
Therefore, bidders should review guarantee rules together with the entire draft contract. Performance bonds are directly linked to delivery, acceptance, warranty, tax debts, social security debts, penalties and termination.
Additional Performance Bond Under Law No. 4735
Article 12 of Law No. 4735 regulates additional performance bonds. In contracts where price difference is payable and the price difference causes an increase in the contract price, an additional performance bond is taken at the rate of 6% of the increase amount. The law also provides that the additional performance bond calculated over the price difference may be collected by deductions from progress payments.
This rule is important in long-term construction, service and supply contracts where price difference mechanisms apply. Contractors often focus on the initial performance bond but forget that additional bond obligations may arise later if price difference payments increase the contract amount.
From a financial planning perspective, the contractor should consider not only the initial 6% performance bond but also possible additional performance bond exposure. If price difference is likely, the contractor should calculate whether bank guarantee limits or cash flow can support additional security requirements.
Return of Performance Bonds and Additional Bonds
Article 13 of Law No. 4735 regulates the return of performance bonds and additional performance bonds. The bond is returned only after it is established that the commitment has been performed in accordance with the contract and tender documents and that the contractor has no debt to the administration arising from the work.
For construction works, half of the performance bond is returned after deficiencies and defects are remedied and the provisional acceptance report is approved. The remaining half is returned after a clearance document from the Social Security Institution is submitted and the final acceptance report is approved.
For works other than construction, if a warranty period is provided, half of the bond is returned after the Social Security Institution clearance document is submitted, and the remaining half is returned after the warranty period ends. If no warranty period is provided, the entire bond may be returned after the relevant conditions are met.
This return mechanism shows that performance bonds may remain blocked for a long time after delivery or completion. Contractors should include this in their financing calculations.
Set-Off Against Contractor Debts
Article 13 of Law No. 4735 also provides that if the contractor’s debts to the administration or Social Security Institution, or statutory tax deductions from wage-type payments, are not paid by the relevant acceptance or warranty dates, the performance bonds may be converted into cash and set off against such debts without protest or court judgment. Any remaining amount is returned to the contractor.
This is a powerful administrative protection mechanism. The contracting authority does not need to file a lawsuit before converting the guarantee into cash for these debts. Contractors should therefore monitor tax, wage deduction and social security obligations carefully throughout contract performance.
Foreign contractors should be especially careful. If they perform work in Turkey through local employees, subcontractors, branches or project offices, Turkish tax and social security obligations may affect the return of performance bonds.
Guarantees That Cannot Be Returned
Article 14 of Law No. 4735 regulates guarantees that cannot be returned. If no set-off is needed under Article 13, but the guarantee is not claimed despite written warning within two years after final account and final acceptance in construction works, or after acceptance or warranty expiry in other works, guarantee letters become invalid and are returned to the bank. Guarantees other than letters of guarantee are recorded as revenue to the Treasury at the end of the period.
This rule is often overlooked. Contractors should actively follow guarantee return procedures. They should not assume that the administration will automatically manage return of guarantees. After acceptance, warranty expiry and clearance documents are completed, the contractor should submit written requests and keep records.
Electronic Guarantees, EKAP and Takasbank
Public procurement guarantees in Turkey are increasingly digitalized. The Public Procurement Authority announced that, as of 5 January 2026, a system would be activated to allow letters of guarantee and surety bonds for contract-stage securities such as additional performance, advance, final account and provisional acceptance deficiency guarantees to be submitted through İstanbul Takas ve Saklama Bankası A.Ş.
The Authority explained that the administration must first identify in EKAP the contractor authorized to submit the relevant guarantee. The contractor must then select the procurement registration number in EKAP, obtain a reference number from the guarantee transactions menu, and apply to the relevant bank or insurance company with that reference number.
This development is highly important for contractors because guarantee management is no longer only a paper-based banking process. EKAP reference numbers, Takasbank integration, electronic guarantee forms and system-based submission rules may directly affect contract compliance.
2026 Rules on Electronic Guarantee Letters and Foreign Currency Guarantees
The Public Procurement Authority announced further rules on 17 March 2026. According to the announcement, for tenders under Law No. 4734 with announcement or invitation dates on or after 1 April 2026, letters of guarantee and surety bonds relating to contract-stage securities such as additional performance, advance, final account and provisional acceptance deficiency guarantees will be issued electronically through EKAP-Takasbank integration.
The same announcement also addressed foreign currency guarantee letters. If a guarantee letter issued in a foreign currency is called, the letter amount must be paid in the relevant foreign currency. However, if the administration’s financial legislation permits collection only in Turkish lira, the amount is paid based on the Central Bank foreign exchange selling rate valid on the date of collection.
This is especially relevant for foreign companies and internationally financed projects. Foreign currency guarantees should be reviewed not only from a banking perspective but also from the perspective of enforceability, collection currency and public accounting rules.
Tender Security and Tax or Social Security Debt Risks
Tender security may also be affected by tax and social security debt controls in electronic procurement. The Public Procurement Authority announced that, for tenders announced after 1 August 2025, bidders’ social security premium debts are checked by contracting authorities through EKAP integration with the Social Security Institution. The announcement further states that bidders who have not completed the Social Security Institution activation process may not be able to submit e-bids in tenders announced after that date.
The Authority also issued a 2025 decision concerning tax debt inquiries. According to the announcement, where a tax debt appears in the commission’s inquiry and the bidder fails to provide a verifiable no-tax-debt document within the given period, the bid may be excluded and the tender security may be recorded as revenue.
This shows that guarantee risk is not limited to the guarantee letter itself. Tax and social security compliance may also affect the bidder’s position and the fate of tender security.
Legal Risks for Foreign Companies
Foreign companies face additional guarantee-related risks in Turkish public procurement.
The first risk is the acceptability of foreign bank guarantees. As explained above, Law No. 4734 recognizes certain foreign bank guarantees and Turkish bank guarantees based on counter-guarantees from foreign banks, but the structure must comply with Turkish law and tender documents.
The second risk is timing. Foreign tenderers receive an additional twelve days for contract-signing invitation periods, but international banking procedures may still require more time.
The third risk is currency. If the guarantee is issued in foreign currency, the 2026 Public Procurement Authority announcement on collection currency and Central Bank exchange rate should be considered.
The fourth risk is EKAP and Takasbank integration. Foreign companies must coordinate with Turkish banks, insurance companies, local representatives and legal counsel to ensure correct electronic guarantee procedures.
The fifth risk is return of guarantees. Foreign contractors may face delays if they do not obtain required tax, social security or acceptance documents.
Common Mistakes in Tender Security and Performance Bonds
The most common mistake is providing insufficient tender security. Since the tender security must not be less than 3% of the tender price, any calculation error may be fatal.
The second mistake is submitting a guarantee letter with an insufficient validity period. Preliminary guarantee letters must be valid for at least 30 days more than the tender validity period.
The third mistake is using non-standard guarantee wording. Public procurement guarantee letters must comply with forms and scope determined by the Public Procurement Authority.
The fourth mistake is assuming that a foreign bank guarantee will automatically be accepted.
The fifth mistake is failing to provide the performance bond on time after winning the tender.
The sixth mistake is ignoring additional performance bond obligations arising from price difference.
The seventh mistake is failing to follow return procedures after acceptance, warranty expiry or final acceptance.
The eighth mistake is missing EKAP or Takasbank reference procedures in electronic guarantee transactions.
Practical Checklist for Bidders
Before submitting a public procurement bid in Turkey, bidders should follow a structured guarantee checklist.
First, check the administrative specification for tender security requirements. Second, calculate the minimum 3% amount correctly. Third, confirm the accepted guarantee forms. Fourth, verify the guarantee letter validity period. Fifth, ensure that the guarantee wording matches the Public Procurement Authority’s standard form. Sixth, confirm whether electronic submission through EKAP, Takasbank or other integration is required. Seventh, coordinate with the bank early. Eighth, check whether foreign bank or foreign currency guarantee issues arise. Ninth, plan performance bond capacity before submitting the bid. Tenth, calculate possible additional performance bond exposure. Eleventh, monitor tax and social security obligations. Twelfth, preserve all guarantee records and system confirmations.
This checklist should be applied separately for each tender because guarantee rules may vary depending on the procurement type, tender procedure, contract structure and electronic procurement framework.
Practical Checklist for Contractors After Contract Signing
After signing the contract, the contractor should continue monitoring guarantee obligations.
First, confirm that the performance bond has been accepted and recorded correctly. Second, track any price difference that may trigger additional performance bond. Third, monitor progress payment deductions if additional bond is collected through deductions. Fourth, comply with tax and social security obligations. Fifth, document performance, delivery, inspection and acceptance. Sixth, request partial return of the bond when provisional acceptance or relevant acceptance conditions are met. Seventh, obtain Social Security Institution clearance where required. Eighth, request return of the remaining bond after final acceptance or warranty expiry. Ninth, respond immediately to any administrative warning. Tenth, keep written evidence of all return requests.
This is important because performance bonds may remain blocked long after physical performance ends.
Frequently Asked Questions
What is tender security in Turkish public procurement?
Tender security is a guarantee submitted during the tender phase to secure the bidder’s obligations before contract signing. Under Article 33 of Law No. 4734, it must not be less than 3% of the tender price.
What is a performance bond in Turkish public procurement?
A performance bond is submitted by the successful tenderer before signing the contract to secure performance of the work. Under Article 43 of Law No. 4734, it is generally calculated as 6% of the contract value.
Can foreign bank guarantees be used in Turkish public tenders?
Yes, but only if they comply with the legal framework. Law No. 4734 recognizes certain foreign bank guarantees and Turkish bank guarantees based on counter-guarantees from foreign banks or similar credit institutions operating abroad.
What happens if the successful bidder does not provide the performance bond?
If the successful bidder fails to submit the performance bond and sign the contract, its tender security may be recorded as revenue without further legal action.
When is the performance bond returned?
Under Law No. 4735, the bond is returned after performance is completed in accordance with the contract and tender documents and after it is established that the contractor has no debt arising from the work. Return timing differs between construction works and other works.
What is an additional performance bond?
An additional performance bond is taken when price difference payments increase the contract amount. Under Article 12 of Law No. 4735, it is calculated as 6% of the increase amount.
Are guarantees submitted electronically in Turkey?
Yes, increasingly. The Public Procurement Authority announced that certain contract-stage guarantees can be submitted through Takasbank and, for tenders announced or invited on or after 1 April 2026, relevant letters and surety bonds will be issued electronically through EKAP-Takasbank integration.
Conclusion
Tender security and performance bonds are central to Turkish public procurement law. They protect the contracting authority during the tender phase, contract-signing phase and contract performance phase. For bidders and contractors, they create serious legal, financial and procedural obligations.
Under Law No. 4734, tender security must generally be at least 3% of the tender price, while performance bond is generally 6% of the contract value. The law strictly regulates accepted guarantee values, guarantee letter validity, foreign bank guarantees, contract-signing obligations and forfeiture consequences. Under Law No. 4735, performance bonds are linked to contract performance, additional price difference payments, return conditions, tax and social security debts, acceptance procedures and warranty periods.
The increasing role of EKAP, Takasbank and electronic guarantee systems makes guarantee compliance even more technical. Bidders must not only obtain the correct guarantee but also submit it through the correct electronic process and monitor related notifications.
For Turkish and foreign companies alike, guarantees should be reviewed before bid submission, not after winning the tender. A company that cannot provide compliant tender security or performance bond may lose the tender, forfeit its guarantee or face contract execution risks. A successful public procurement strategy in Turkey therefore requires early banking preparation, legal review of tender documents, accurate guarantee wording, strict deadline management and careful follow-up until the guarantee is fully returned.
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