The route of application against the return of security in a municipal tender, or against its forfeiture (recording as revenue, gelir kaydı), depends on the law to which the tender is subject, on whether the security is a bid bond or a performance bond, and on whether the dispute arose before or after the contract. Annulment of the tender act, the return of money that has been collected, and a claim arising from a private law contract are not the same lawsuit. This distinction determines both the competent court and the filing period.
A company learning that its letter of guarantee has been sent to the bank, and a cash security continuing to be held in the municipality's account, give rise to different problems. In the first, the need to prevent the act from being carried out comes to the fore; in the second, the need to show that the conditions for return have been met and that the receivable has fallen due. The first thing to do is to establish, with written documents, under which decision and which obligation the security is being held.
Which Security Regime Applies in Municipal Tenders?
The Sale and Lease of Real Estate Differ from the Purchase of Goods and Services and Construction Works
A municipality's sale or lease of its own real estate is, as a rule, assessed under the State Tender Law No. 2886. A municipality's purchase of goods or services and its commissioning of construction works are subject to the Public Procurement Law No. 4734, taking its scope and exceptions into account; the contracts concluded as a result of those tenders are subject to the Public Procurement Contracts Law No. 4735.
It is not enough that the tender notice merely carries the municipality's name. The tender may have been held by a municipal company, an affiliated administration or the municipality itself. The presence of a special law, an exception or a different type of contract also changes the review. For this reason, the tender notice, the specification, the contract and the name of the work in the security document must be read together.
The Function of the Bid Bond and the Performance Bond
The bid bond (geçici teminat) secures obligations during the tender process; the performance bond (kesin teminat) secures the performance of the undertaking in accordance with the contract and the tender documents. There are differences in how return is carried out among a bank letter of guarantee, a cash payment and the other assets accepted by the legislation. The return or release of a bank letter and the repayment of an amount collected in cash are separate requests.
| Subject | Law No. 2886 | Laws No. 4734 and 4735 |
|---|---|---|
| Basic calculation of the bid bond | 3% of the estimated value; the special rules in Article 25 are reserved | An amount determined by the bidder, not less than 3% of the bid price; there is an exception for consultancy |
| General rate of the performance bond | 6% of the tender price; exceptions relating to the nature of the work are examined separately | Generally 6% of the tender price; special provisions such as below-threshold bids and consultancy are examined separately |
| Return of the performance bond | Proper performance of the undertaking and the status of related debts, in particular Article 56 | The type of work, acceptance and the warranty period, and related debts; in particular Article 13 of Law No. 4735 |
| Application system | The complaint system of the Public Procurement Authority (KİK) does not apply automatically | In acts at the tender stage, a complaint and an objection complaint (itirazen şikâyet) may come into play |
Calculation example: In an ordinary Law No. 2886 tender with an estimated value of 10 million Turkish lira (TL), the basic calculation of the bid bond is 300,000 TL. In a purchase under Law No. 4734, the minimum bid bond of a bidder who offers 12 million TL is 360,000 TL. This example shows that the calculation base differs even when the same percentage is used; it does not, on its own, determine which amount may be forfeited.
In Which Cases Can Security Be Forfeited?
The Statutory Basis and the Specific Breach Must Be Shown Together
Forfeiture is not a general sanction to which the administration can resort in every disagreement. The conduct stated in the act must correspond to the consequence in the relevant law. A bidder's failure to sign the contract, failure to provide the required performance bond, failure to meet certain participation conditions, and a contractor's conduct contrary to the contract cannot be examined under the same provision.
For Law No. 2886, Articles 54 and 57 in particular; for public procurement, the relevant participation and contract provisions of Law No. 4734; and, at the contract stage, Law No. 4735 are assessed. Writing a provision into the specification does not create an unlimited power of forfeiture that the law does not contain. On the other hand, the valid security obligations specific to a contract cannot be disregarded merely by looking at the heading.
Why Do Notification, Invitation and Calculation of Time Matter?
If it is asserted that the contract was not signed, the date on which and the manner in which the invitation was notified are decisive. The finalized tender decision, the waiting obligation in the objection process, the invitation to the contract and the period granted must each be shown separately. It cannot be assumed that a bidder is in default without a properly issued invitation.
At what stage the obligation to sign revives during the complaint process is also examined. A court decision on a debarment decision that identifies an error in the invitation may be a strong point of assessment for the security act in the same event. However, debarment and security may give rise to separate acts and separate filing periods; bringing a lawsuit against one does not automatically remove the other.
Can All or Only Part of the Security Be Forfeited?
There is no single answer to this question that is valid for every tender. The provision applied, the type of breach, a partial bid being submitted, the items awarded to the bidder and the amount of the security provided are assessed. It is a mistake to conclude, starting from the minimum rate of 3%, that only an amount of 3% may be forfeited in every case.
A statement of account should be requested from the administration: which item, which amount, which date and which statutory provision was used as the basis? Does the amount in the compensation request sent to the bank match the amount in the forfeiture decision? If there are several letters, is it clear which work each letter belongs to? These questions turn a general claim of unlawfulness into a dispute that can be reviewed.
What Conditions Apply to the Return of Security?
The Bid Bond When the Tender Is Concluded
Article 34 of Law No. 4734 contains a provision on retaining the security of the bidder to whom the tender is awarded and of the holder of the second most economically advantageous bid. The return of the security of the other bidders and the return to be made when the winner provides the performance bond and signs the contract do not take place at the same stage. The position of the holder of the second bid is also monitored separately.
In the process under Law No. 2886, the tender decision, approval and contract obligations are the basis. It is important that the winner shows that it has fulfilled its statutory obligations. The administration's cancellation of the tender does not, on its own, show that the bidder was at fault. If the reason for the rejection of a return request is not clear, the decision and the calculation's grounds should be requested in writing.
The Performance Bond When the Work Is Completed
Article 13 of Law No. 4735 distinguishes construction works from other works. In construction works, the remedying of the deficiencies identified at provisional acceptance, final acceptance, the clearance certificate (ilişiksizlik belgesi) and related debts; in other works, acceptance and the warranty period, if any, matter. Depending on the conditions in the law, a staged or full return comes into play. For goods purchased ready-made from the market, the special provision on the clearance certificate is also taken into account.
If there is an unpaid debt to the administration, to the Social Security Institution (SGK) or relating to the deductions stated in the law, arising from the work, offsetting (mahsup) and the return of the remaining amount are assessed. The administration merely saying “the work has not yet been closed” is not a sufficient explanation of the account. A documented answer is sought to these questions: which acceptance procedure is missing, which debt exists, and how much is to be retained?
Under Article 56 of Law No. 2886, too, the proper performance of the undertaking and the status of related debts are important. The completion of the work, the handover of the leased premises or the surrender of the keys does not, in every file, show on its own that the conditions for return have been completed. The handover record, the statement of debts and the manner in which the contract ended are assessed together.
Where Is the Objection Filed, and in Which Court Is the Action Brought?
The Administrative Act at the Tender Stage and the Application to the Public Procurement Authority
For claims of unlawfulness against tender acts under Law No. 4734, within the statutory scope, a complaint to the administration and an objection complaint to the Public Procurement Authority (Kamu İhale Kurumu) may be routes that must be exhausted before suit. The general period for a complaint is 10 days; in tenders under Articles 21/b and 21/c it is 5 days. The event from which the period starts, whether learning of the act, the notice or the documents, is determined separately. The conditions of the later objection complaint stage are also calculated under Articles 55 and 56.
This system cannot be carried over directly to a tender for municipal real estate under Law No. 2886. Moreover, even in a tender subject to Law No. 4734, a full remedy claim (tam yargı) seeking the return of the amount collected may be assessed differently from an application aimed at annulment of the tender act. The actual outcome sought, rather than the heading of the petition, is decisive.
Return of the Amount Collected and the Full Remedy Action
If repayment of security collected because of an administrative act is sought, a full remedy action is considered under Article 12 of the İYUK (Administrative Procedure Law No. 2577) and the related time-limit provisions. Whether the annulment claim and the monetary claim are raised together or separately, the existence of an earlier case and the notification of the decision change the procedure of the file.
In its decision of September 26, 2023, E.2023/2286, K.2023/3742, the 13th Chamber of the Council of State (Danıştay 13. Daire) examined a request for the return of part of the security forfeited in a health administration's goods procurement tender. The Chamber treated the claim as a full remedy claim; it found the forwarding of the petition to the Public Procurement Authority contrary to procedure and reversed the decision. It also stated that the dispute was not within the scope of expedited proceedings. This decision is an example not of a direct municipal tender or of a decision accepting the merits of a return, but of identifying the correct procedure.
A Security Dispute Arising from a Signed Contract
During the performance, termination or liquidation of a private law contract, the retention or cashing of a performance bond is often resolved in the ordinary (civil) courts. The administration being a party does not turn all receivables arising from the contract into an administrative lawsuit. Nevertheless, whether the contract has the nature of an administrative contract must be examined separately.
In its decision of September 26, 2022, E.2022/3422, K.2022/3349, the 13th Chamber of the Council of State (Danıştay 13. Daire) dealt with a dispute over the termination of a signed transport services contract and the forfeiture of the performance bond, arising at the contract stage. The dismissal for lack of jurisdiction, given on the ground that the ordinary courts are competent, was affirmed. The decision does not say that the security will necessarily be returned; it explains the branch of the judiciary in which the dispute will be heard.
Jurisdiction within the ordinary courts is also determined separately. In a lease relationship, the civil court of peace (sulh hukuk mahkemesi); in other contracts, depending on the nature of the relationship, the civil court of first instance (asliye hukuk mahkemesi) or the commercial court of first instance (asliye ticaret mahkemesi) may come into play. In a dispute that falls within mandatory mediation, the pre-suit application requirement must also be checked separately.
How Are the Filing Period and Interim Legal Protection Assessed?
Thirty Days and Sixty Days Must Not Be Confused
In an annulment action against tender acts within the scope of Article 20/A of the İYUK, a 30-day period applies as a rule, and an application under Article 11 does not suspend this period. By contrast, not every request for return of security is subject to the expedited procedure. As seen in the 2023 decision above, in a dispute of the nature of a full remedy claim, the general procedure and, as a rule, a 60-day filing period may come into play.
The start of the period should be determined from the notification of the act, from learning of the collection and from which claim is being raised. Petitioning the municipality repeatedly does not by itself revive a filing period that has already passed. For a contractual receivable belonging to the ordinary courts, the relevant statute of limitations and conditions for suit are examined instead of the administrative filing periods.
If the Letter Has Gone to the Bank, Is a Stay of Execution Possible?
When annulment of an administrative act is sought, the conditions of a clear unlawfulness and of damage that is difficult or impossible to remedy must be explained together under Article 27 of the İYUK. The mere filing of a lawsuit does not stop the bank from paying or the municipality from collecting. The letter's compensation request, the payment date, the limits, and the concrete effects on the business's cash flow must be supported by documents.
An interim injunction (ihtiyati tedbir) in the ordinary courts and a stay of execution (yürütmenin durdurulması) in the administrative courts are different institutions. Article 26 of Law No. 2886 and Article 34 of Law No. 4734 contain prohibitions on attachment and interim injunctions over the security taken. For this reason, “obtaining an injunction from the court and immediately stopping the security” cannot be presented as a solution available in every file. The act to which the request is directed, the security relationship and the limits in the special law are examined together.
Which Documents Should Be Prepared for the Application?
- The tender notice, the specification, any addendum and the contract.
- The bid bond and performance bond documents; amount, period and work information.
- The tender decision, approval, the invitation to the contract and the notification records.
- The forfeiture decision, the compensation letter to the bank and the payment receipt.
- The complaint, the objection complaint and earlier court decisions.
- Acceptance and handover records, lists of deficiencies and warranty period records.
- The administration's statement of debts and offsetting, and clearance certificates.
With these documents, four dates should be written on a separate timeline: learning of the disputed decision, the administrative application, the bank's payment and the filing of the lawsuit. The claim must also be framed clearly: is annulment of the decision, return of the letter, payment of the collected money with interest, or a particular combination of these being sought? The start and type of interest must also be tied to a legal ground.
Conclusion
Resolving a security dispute in a municipal tender depends first on identifying the correct law and the stage of the dispute. The basis of the forfeiture, the invitation and notification process, the calculation of the amount, and the acceptance and debt records must be examined together. Separating the routes of annulment, full remedy claim and contractual receivable is the key step that prevents an application from ending without result because of jurisdiction, time limits or conditions for suit.
Related articles: Annulment Action and Stay of Execution against a Decision Debarring Participation in Tenders; Annulment of a Municipal Real Estate Sale Tender: Participation in the Tender, Unlawfulness and Routes of Action; Objecting to a Municipal Real Estate Leasing Tender: Specification, Competition and Annulment of the Tender.
Frequently Asked Questions
If the municipality does not return my security, can I bring a lawsuit directly?
It depends on the nature of the claim. For an act in the tender, the mandatory complaint system; for a full remedy claim, the rules on administrative lawsuits; and for a private law contract, the relevant conditions for suit are assessed.
Can only 3% of the security be forfeited?
There is no such limit in every case. The provision applied, the nature of the breach, a partial bid and the amount of the security must be examined together.
If the contract has ended, is the performance bond returned immediately?
Acceptance, handover, the warranty period if any, and the status of related debts are checked. The expiry of the contract's term alone may not be sufficient.
Is a security lawsuit always brought in the administrative court?
No. Disputes arising from the performance of a private law contract may be heard in the ordinary courts. The nature of the contract and the source of the claim are decisive.
If the debarment decision is annulled, is the security automatically returned too?
This result does not arise automatically in every file. The basis and the period of the security act must be examined separately, and the necessary request for return or lawsuit must be expressly raised.
Sources and legal bases
- State Tender Law No. 2886; in particular Articles 25-26, 54, 56-57.
- Contract and security provisions of Law No. 2886; accessible continuation of the text.
- Public Procurement Law No. 4734; in particular Articles 33-35, 42-45, 54-57.
- Public Procurement Contracts Law No. 4735; in particular Articles 13-14, 19-22.
- Administrative Procedure Law No. 2577 (İYUK); Articles 7-8, 11-12, 20/A, 27-28.
- 13th Chamber of the Council of State (Danıştay 13. Daire), September 26, 2023, E.2023/2286, K.2023/3742; accessible mirror of the decision.
- 13th Chamber of the Council of State (Danıştay 13. Daire), September 26, 2022, E.2022/3422, K.2022/3349; official PDF of the decision.