• By Raymond Momanyi

Tender and Performance Bonds Kenya | Compare Quotes

Compare tender bond and performance bond quotations in Kenya for contractors, suppliers, consultants and SMEs through Imana Insurance Agency Kenya Ltd in Westlands, Nairobi.

Tendering for Business in Kenya? Get the Right Bond

 
Winning a tender can open the door to new revenue, stronger business relationships and long-term growth.
 
However, a strong technical and financial proposal may still be rejected when the tender security is missing, issued in the wrong format, addressed to the wrong beneficiary or valid for fewer days than required.
 
After winning the tender, the successful bidder may also be required to provide a performance bond before signing the contract or starting the work.

Imana Insurance Agency Kenya Ltd helps contractors, suppliers, consultants and businesses compare quotations for tender and performance bonds in Kenya from trusted insurance companies.
 
The objective is to help the applicant obtain a bond that matches the tender or contract requirements—not merely the cheapest document available.

What Is a Tender Bond?

 
A tender bond is also commonly called:

•  Bid bond 
•  Tender security 
•  Bid security 
•  Tender guarantee 

It is provided by a bidder when submitting a tender and is intended to secure the bidder’s obligations during the procurement process.
 
Kenya’s Public Procurement and Asset Disposal Act defines tender security broadly as a guarantee required by a procuring entity to secure fulfilment of obligations in the tender process. Recognised arrangements may include bank or insurance guarantees, surety bonds, standby letters of credit and other approved forms. 

The amount, format and validity period are normally specified in the tender document.
 

Why Do Procuring Entities Require Tender Security?

 
A procuring entity spends time and resources preparing, advertising and evaluating a tender.
 
Tender security helps discourage bidders from submitting offers without the intention or capacity to proceed.
 
Depending on the tender conditions, the security may be called where a bidder:
 

•  Withdraws its bid during the tender validity period 
•  Refuses to sign the contract after award 
•  Fails to provide the required performance security 
•  Changes material terms after submitting the tender 
•  Breaches another obligation stated in the tender security wording 

The exact circumstances are determined by the tender document and guarantee wording.
 

Who Can Issue a Tender Security in Kenya?

 
Under Kenya’s procurement framework, tender security may be provided in recognised forms. Regulation 45 has been cited as permitting cash, a bank guarantee, a guarantee from a licensed insurance company appearing on the relevant authorised list, or a guarantee from an approved financial institution. 

The Public Procurement Regulatory Authority publishes a list of insurance companies authorised to issue bid securities. Bidders should check the current list and the specific tender instructions before arranging a guarantee. 

An insurance company being licensed to transact general insurance does not automatically mean that every tendering entity will accept every guarantee it issues. The tender document remains the primary guide.
 

What Is a Performance Bond?

 
A performance bond is a guarantee normally provided after a bidder has been awarded a contract.
 
It protects the employer or procuring entity against certain losses arising when the contractor fails to perform the contract according to the agreed conditions.
 
The performance bond may relate to:
 

•  Completion of construction works 
•  Delivery of goods 
•  Installation of equipment 
•  Provision of contracted services 
•  Completion within the agreed period 
•  Compliance with contract specifications 
•  Correction of defects 
•  Other contractual obligations 

The bond does not guarantee that every disagreement will result in payment. A demand must comply with the bond wording and applicable contract conditions.
 

Performance Security Requirements in Public Procurement

 
Section 142 of Kenya’s Public Procurement and Asset Disposal Act provides that, subject to the regulations, a successful tenderer may be required to submit performance security of not more than 10% of the contract amount before signing the contract.
 
The section also contains exceptions for certain lower-value procurements and contracts reserved for women, youth, persons with disabilities and other disadvantaged groups. For the specified reserved categories, the security may be waived or fixed at not more than 1% of the contract price. 

The exact requirement should always be confirmed from the award letter, tender document, contract and applicable procurement rules.
 

Tender Bond Versus Performance Bond

 
A tender bond applies during the bidding stage.
 
It shows that the bidder intends to keep the tender valid, accept the award and provide any required performance security.
 
A performance bond applies after the contract has been awarded.
 
It supports the contractor’s obligation to perform the awarded contract according to the agreed terms.
 
In simple terms:
 

The tender bond helps you compete for the contract. The performance bond helps secure your performance after winning it.

Other Bonds a Contractor May Need

 
A contract may require several guarantees at different stages.
 
These may include:
 

Advance payment bond

 
This protects the employer where money is paid to the contractor before work or delivery begins.
 

Maintenance bond

 
This may support the contractor’s obligation to correct defects during an agreed maintenance or defects-liability period.
 

Retention bond

 
This may be used instead of the employer retaining part of the contractor’s payment.
 

Customs bond

 
This supports certain customs obligations involving imported or transit goods.
 

Immigration bond

 
This may be required for certain immigration or work-permit obligations.
 

Supply bond

 
This may guarantee delivery of goods according to the agreed contract.
 
Each bond serves a different purpose. A tender bond should not be presented where a performance bond is required.
 

Who Needs Tender and Performance Bonds?

 
These bonds may be required by:
 

•  Building contractors 
•  Road contractors 
•  Electrical contractors 
•  Mechanical contractors 
•  Water and civil works contractors 
•  ICT companies 
•  Equipment suppliers 
•  Medical suppliers 
•  Security companies 
•  Cleaning companies 
•  Logistics providers 
•  Transport companies 
•  Consultancy firms 
•  Maintenance contractors 
•  Manufacturers 
•  SMEs supplying government institutions 
•  Businesses supplying county governments 
•  Companies working with NGOs and private corporations 

Both public and private organisations may require bonds.
 

Tender Security Is a Mandatory Compliance Document

 
Tender evaluation is strict.
 
A bid can be rejected where the security does not meet the required amount, validity period, wording, issuer or format.
 
A 2025 Court of Appeal decision discussed a procurement where a bid had been unsuccessful because the submitted tender security was valid for 119 days instead of the required 120 days. The case demonstrates why bidders must follow mandatory tender instructions exactly rather than assuming a small discrepancy will be ignored. 

A bond should therefore be checked against the tender document line by line before submission.
 

What Should You Check on a Tender Bond?

 
Before including the bond in your tender, confirm:
 

•  Correct name of the bidder 
•  Correct name of the procuring entity 
•  Tender number 
•  Tender description 
•  Required security amount 
•  Currency 
•  Commencement date 
•  Expiry date 
•  Claim period, where applicable 
•  Required guarantee wording 
•  Whether an insurance guarantee is acceptable 
•  Whether the issuing insurer is authorised 
•  Signatures and seals 
•  Whether the original document is required 
•  Whether the security must remain valid beyond tender validity 
•  Whether electronic verification is required 

Do not copy instructions from an older tender. Every tender should be treated separately.
 

What Should You Check on a Performance Bond?

 
A performance bond should accurately reflect:
 

•  Contractor’s legal name 
•  Employer or beneficiary 
•  Contract number 
•  Contract description 
•  Contract value 
•  Required bond percentage 
•  Bond amount 
•  Currency 
•  Effective date 
•  Expiry date 
•  Defects-liability obligations 
•  Demand wording 
•  Whether the bond is conditional or unconditional 
•  Governing law 
•  Extension requirements 
•  Cancellation conditions 

The bond wording should be reviewed together with the award letter and contract.
 

Conditional and Unconditional Bonds

 
A conditional bond generally requires the beneficiary to demonstrate that the contractor breached the underlying contract before payment is made.
 
An unconditional or on-demand bond may require the issuer to pay after receiving a compliant written demand, without a full determination of the underlying contract dispute at that stage.
 
The difference is significant.
 
Contractors should understand the wording before accepting the bond conditions because an on-demand obligation can expose the issuing insurer—and ultimately the applicant under the applicable indemnity arrangements—to faster payment demands.
 

Is a Bond the Same as Ordinary Insurance?

 
A bond is not the same as ordinary insurance protecting a policyholder from an accidental loss.
 
It involves three main parties:
 

• The principal: The contractor, bidder or supplier whose obligation is guaranteed 
• The beneficiary: The procuring entity, employer or client receiving the guarantee 
• The guarantor: The insurance company or financial institution issuing the bond 

The insurer may assess the applicant’s financial strength, technical ability, contract experience and capacity to complete the work.
 
The applicant may also be required to sign an indemnity agreement and provide security or collateral, depending on the insurer’s assessment.
 

Documents Required for a Tender Bond Quotation

 
Requirements may include:
 

•  Completed bond proposal form 
•  Tender document 
•  Tender notice 
•  Tender security format 
•  Company registration documents 
•  CR12 or ownership details 
•  KRA PIN 
•  Tax compliance certificate 
•  Business permits 
•  Directors’ identification documents 
•  Audited financial statements 
•  Management accounts 
•  Bank statements 
•  Company profile 
•  Evidence of similar completed contracts 
•  Ongoing contracts 
•  Contractor registration certificates 
•  Professional licences 
•  Claims or bond history 

Simple tender bonds may require fewer documents, while large or complex guarantees may require a full financial and technical assessment.
 

Documents Required for a Performance Bond

 
The insurer may request:
 

•  Award letter 
•  Signed contract or draft contract 
•  Performance bond format 
•  Bill of quantities 
•  Project programme 
•  Contract value 
•  Commencement and completion dates 
•  Evidence of financing 
•  Audited accounts 
•  Bank statements 
•  Previous project experience 
•  Current projects 
•  Advance-payment details 
•  Contractor registration 
•  Directors’ indemnities 
•  Collateral documents where required 
•  Existing guarantees and borrowing obligations 

Submitting complete information early gives the insurer enough time to evaluate the request.
 

How Is the Cost of a Bond Determined?

 
The cost may be influenced by:
 

•  Bond amount 
•  Bond duration 
•  Type of bond 
•  Contract value 
•  Contractor’s financial position 
•  Experience in similar work 
•  Previous bond claims 
•  Employer or beneficiary 
•  Contract complexity 
•  Required wording 
•  Collateral offered 
•  Existing bond exposure 
•  Country or territorial risk 
•  Extension period 

A lower rate does not automatically mean a better bond.
 
The most important issue is whether the document will satisfy the tender or contract requirements.
 

Common Reasons Tender Bonds Are Rejected

 
A bond may be rejected because of:
 

•  Incorrect beneficiary 
•  Wrong bidder name 
•  Insufficient amount 
•  Incorrect currency 
•  Short validity period 
•  Unauthorised issuer 
•  Missing signature 
•  Missing seal 
•  Altered wording 
•  Wrong tender number 
•  Conditional wording where an on-demand guarantee was required 
•  Submission of a copy where an original was required 
•  Late submission 
•  Failure to follow the prescribed format 

A bidder should not wait until the tender closing date to request the bond. Last-minute applications increase the risk of errors and leave little time for correction.
 

What Happens When a Performance Bond Is Called?

 
The beneficiary submits a demand to the bond issuer according to the guarantee wording.
 
The insurer will assess whether the demand meets the bond’s requirements.
 
Where a valid demand is paid, the insurer may seek recovery from the contractor under the indemnity or security arrangements agreed when the bond was issued.
 
A performance bond should therefore not be viewed as free financing or a substitute for performing the contract.
 
The contractor remains responsible for completing the work and meeting contractual obligations.
 

How to Reduce the Risk of a Bond Claim

 
Contractors should:
 

•  Price projects realistically 
•  Understand the contract before signing 
•  Maintain adequate working capital 
•  Keep accurate project records 
•  Follow the project programme 
•  Communicate delays early 
•  Obtain written instructions for variations 
•  Submit progress reports 
•  Document extensions of time 
•  Observe quality standards 
•  Maintain required insurance 
•  Resolve disputes promptly 
•  Request bond extensions before expiry where necessary 

The best protection against a bond claim is proper contract performance.
 

How Imana Makes Bond Comparison Easier

 
Imana Insurance Agency Kenya Ltd helps businesses compare bond quotations from trusted insurers based on:
 

•  Bond rate 
•  Minimum premium 
•  Security requirements 
•  Collateral requirements 
•  Indemnity conditions 
•  Bond wording 
•  Validity period 
•  Processing requirements 
•  Insurer capacity 
•  Extension terms 
•  Required documentation 
•  Turnaround time 

The cheapest bond quotation may require heavy collateral, while another insurer may provide more suitable security terms.
 
A full comparison allows the contractor to understand both the price and the financial commitment behind the guarantee.
 

Tender and Performance Bonds in Westlands and Nairobi

 
Imana serves contractors, suppliers, consultants and businesses operating in:
 

•  Westlands 
•  Nairobi CBD 
•  Parklands 
•  Riverside 
•  Industrial Area 
•  Upper Hill 
•  Gigiri 
•  Lavington 
•  Runda 
•  Mombasa Road 
•  Thika Road 
•  Other parts of Nairobi and Kenya 

Visit:
 
Imana Insurance Agency Kenya Ltd
4th Floor, Krishna Centre
Woodvale Grove, Westlands
Nairobi, Kenya
 
Clients outside Nairobi can submit tender documents, award letters and supporting records electronically for preliminary review.
 

Compare Tender and Performance Bond Quotes Today

 
Do not allow an incorrect bond to disqualify an otherwise strong tender.
 
Send the tender document or award letter early so that the bond amount, validity, wording and beneficiary details can be reviewed.
 
Call or WhatsApp Imana: +254 796 209 402
Website: www.imana.co.ke
Corporate insurance page: https://imana.co.ke/insurance/corporate-insurance
 

Win the opportunity. Understand the obligation. Secure the right bond before the deadline.

Frequently Asked Questions

What is a tender bond?

 
It is a guarantee submitted with a tender to secure the bidder’s obligations during the procurement process.
 

Is a tender bond the same as a performance bond?

 
No. A tender bond applies during bidding, while a performance bond is normally required after contract award.
 

Can an insurance company issue a tender bond in Kenya?

 
Yes, where the tender permits an insurance guarantee and the issuer meets the applicable regulatory and tender requirements.
 

How much is a performance bond in Kenya?

 
For public procurement, the applicable requirement may be up to 10% of the contract amount, subject to the Act, regulations, exemptions and the specific tender conditions. 

Can a tender bond be rejected because of one day?

 
Yes. Validity periods are mandatory where stated. A bond valid for fewer days than required may make a tender non-responsive. 

Is collateral required?

 
It depends on the applicant, bond amount, financial strength, contract and insurer’s underwriting requirements.
 

How quickly can a bond be issued?

 
Turnaround depends on the bond amount, complexity and completeness of the submitted documents. Applicants should apply well before the tender deadline.
 

Does Imana issue the bond directly?

 
Imana is an insurance intermediary. It helps clients compare and arrange bonds issued by suitable insurance companies, subject to underwriting approval.
 
 
Bond issuance, rates, collateral, indemnities and acceptance terms are subject to the tender requirements and underwriting approval of the selected insurance company. Applicants should obtain independent legal or procurement advice where necessary.