EMD means - Earnest Money Deposit.
The purchasers takes this amount to check the earnestness/seriousness of the bidders in case they are selected as winners. The EMD amount the bidder has to pay along with the bid response. It is one of the most Important document/instrument which a bidder is supposed to submit along with other documents. The format/instrument through which the EMD can be submitted, depends upon the purchaser's preference. Generally the EMD is sought in the form of bank guarantee or demand draft. In very limited cases an insurance bond is also accepted.
The EMD value can be (again depends on purchaser's preference) a fixed amount Or a certain % of the bid price, which the bidder is quoting. The % varies from 1% to 5% but the typical value is 2%. In order to avoid any leakage of information among the bidders and hence bring more transparency and efficiency in purchasing process the purchaser's now are asking for a fixed value instead of % of bid price.
EMD instrument is returned back to all unsuccessful bidders once the evaluation is completed and the contract is signed by the successful bidder. In case of successful bidder, EMD is exchanged by Security Deposit (around 10% of the bid price).
Only in cases where the successful bidder refuse to sign the contract and fails to submit the security deposit, the EMD is forfeited.
In case of EOI and pre-qualification rounds, EMD is not asked by the purchasers.