NHAI Prescribes Phased Release Mechanism for Additional Performance Security

The National Highways Authority of India (NHAI), vide Policy Circular bearing reference no. 11.96/2026 dated July 10, 2026 (the “Circular”), has introduced a structured framework governing the release of Additional Performance Security (APS) furnished by contractors. The Circular modifies Policy Circular No. 11.94/2026 dated June 19, 2026, which had revised the applicability of APS for ongoing bidding processes and future works relating to Non-Regular Civil Works (NRCW) executed on EPC mode, Operation and Maintenance (O&M), Short-Term Maintenance Contracts (STMC), Performance Based Maintenance Contracts (PBMC), Black Spot rectification works and other specified works sanctioned at the NHAI level.

While the earlier framework prescribed the circumstances in which APS was required to be furnished, the Circular introduces a milestone-based mechanism for its release, linking the release of APS to timely project completion, post-construction performance and successful completion of the Defects Liability Period (DLP).

Under the revised framework, the APS shall be released in the following stages:

1. 25% of the APS upon issuance of the Completion Certificate, provided the project is completed within the scheduled completion period, including any contractual grace period, without grant of any Extension of Time (EOT). Where the project is not completed as per the scheduled date of completion without EOT, APS for this portion shall be released together with the subsequent tranche.
2. A further 25% of the APS one year after issuance of the Completion Certificate, subject to the project satisfying the contractual standards relating to the Pavement Quality Index (PQI) and International Roughness Index (IRI) in the independent Network Survey Vehicle (NSV) survey conducted by the Ministry of Road Transport and Highways (MoRTH)/NHAI, for which the Circular directs reference to MoRTH Office Memorandum No. RW/G-23012/01/2019-W&A (Part-V) dated May 21, 2026.
3. The remaining 50% of the APS shall be released upon successful completion of the DLP.

The Circular also introduces a performance-linked disincentive. Where, in any biannual independent NSV survey conducted after issuance of the Completion Certificate, the project fails to satisfy the prescribed PQI or IRI requirements under the contract, a non-refundable penalty equivalent to 5% of the APS shall be imposed for each such instance of non-compliance.

Importantly, NHAI has directed that the above release mechanism shall form part of all bids covered under the earlier Policy Circular No. 11.94/2026 that are pending receipt as on the date of issuance of the Circular, as well as all future bids relating to NRCW works executed on EPC mode, O&M, STMC, PBMC, Black Spot rectification works and other specified projects sanctioned at the NHAI level.

The Circular marks a significant shift from treating Additional Performance Security merely as an upfront financial safeguard to linking its release with measurable project outcomes.