Bid Is Considered Nonresponsive When Bid Guarantee Is Defective

A contractor protested the rejection of its bid as nonresponsive under an invitation for bids (IFB) issued by the Coast Guard for security protection and patrol services. The protester was low bidder, but its bid was found to be nonresponsive because the "Irrevocable Letter of Credit" accompanying the bid in attempted satifaction of the bid guarantee provisions of the IFB was determined to be insufficient and legally defective. The protester's bonding company notified the contracting officer shortly after bid opening that it would stand behind the proester's bid guarantee. The bid guarantee submitted by the protester caused the protester to act as its own surety, rather than obtaining a promise of payment from an independent source of credit such as a bank or other financial institution. The effect and purpose of a valid letter of credit is to substitute the credit of some entity other than the customer for the credit of the customer. Therefore, the bid guarantee was properly rejected by the contracting officer, and the post bid opening guarantee made by the protester's bonding company was not sufficient because the bid guarantee must accompany the bid. The other responding contractor's bid was found to be responsive and reasonable, therefore there was no basis for cancellation of the solicitation. The protest was denied accordingly.