B-156271, APR. 20, 1965

B-156271, APR. 20, 1965

TO ARNOLD M. SCHWARTZ, ESQUIRE:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 4, 1965, PRESENTING ON BEHALF OF THE TRUSTEE IN BANKRUPTCY OF FACILITIES MAINTENANCE CORPORATION A CLAIM FOR $30,783.17 UNDER ARMY CONTRACT NO. DA-04-197 AMC-16 (M), AWARDED ON NOVEMBER 26, 1962, TO THE FACILITIES MAINTENANCE CORPORATION FOR THE FURNISHING OF JANITORIAL SERVICES DURING A PERIOD OF ONE YEAR COMMENCING ON DECEMBER 1, 1962, AT THE OAKLAND ARMY TERMINAL AND AT FORT MASON, CALIFORNIA.

THE CIRCUMSTANCES GIVING RISE TO THE CLAIM ARE SET FORTH IN A DECISION RENDERED ON DECEMBER 31, 1964, BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS, APPEAL OF FACILITIES MAINTENANCE CORPORATION, ASBCA NO. 8950. COPY OF THAT DECISION WAS TRANSMITTED WITH YOUR LETTER AND YOU REQUEST THAT WE CONSIDER THE ENTIRE RECORD, INCLUDING ALL PAPERS, PLEADINGS, EXHIBITS AND THE TRANSCRIPT OF HEARING IN THE CASE. YOU TAKE EXCEPTION TO CERTAIN OF THE STATEMENTS MADE IN THE OPINION OF THE BOARD BUT STATE THAT THE FACTS SET FORTH IN THE OPINION ARE FOR THE MOST PART CORRECT AND UNDISPUTED.

ACCORDING TO THE BOARD'S DECISION, THE CONTRACT WAS TERMINATED FOR DEFAULT, EFFECTIVE AS OF JANUARY 31, 1963, BECAUSE THE APPELLANT FAILED TO FURNISH A REQUIRED PERFORMANCE BOND IN AN AMOUNT EQUAL TO 100 PERCENT OF THE ESTIMATED CONTRACT PRICE OF $271,476.37 AND A REQUIRED PAYMENT BOND IN AN AMOUNT EQUAL TO 50 PERCENT OF THE ESTIMATED CONTRACT PRICE. THE APPELLANT HAD FILED AN APPEAL ON FEBRUARY 4, 1963, AGAINST THE CONTRACTING OFFICER'S ACTION IN TERMINATING THE CONTRACT FOR DEFAULT. IT WAS ADJUDICATED A BANKRUPT ON APRIL 3, 1963, AND THE TRUSTEE IN BANKRUPTCY WAS AUTHORIZED BY THE BANKRUPTCY COURT TO PROSECUTE THE PENDING APPEAL. THE BOARD CONSIDERED AND SPECIFICALLY REJECTED THE CONTENTIONS MADE BY COUNSEL FOR THE TRUSTEE IN BANKRUPTCY THAT THE CONTRACT WAS VOID AND THAT THE GOVERNMENT HAD WAIVED THE REQUIREMENT FOR THE FURNISHING OF A PERFORMANCE BOND AND A PAYMENT BOND. THE BOARD ALSO REJECTED THE CONTENTION OF THE APPELLANT AND COUNSEL FOR THE TRUSTEE IN BANKRUPTCY THAT, IN THE PARTICULAR CIRCUMSTANCES OF THE CASE, THE DEFAULT TERMINATION SHOULD BE CONVERTED INTO A TERMINATION FOR CONVENIENCE OF THE GOVERNMENT, WHICH WOULD HAVE THE EFFECT OF RELIEVING THE APPELLANT FROM ANY LIABILITY FOR THE EXCESS COST OF A REPLACEMENT CONTRACT FOR SERVICES REQUIRED AFTER THE EFFECTIVE TERMINATION DATE (JANUARY 31, 1963) UNTIL NOVEMBER 30, 1963, THE EXPIRATION DATE OF THE APPELLANT'S CONTRACT.

THE DECISION OF THE BOARD SHOWS THAT THE CONTRACT RESULTED FROM AN INVITATION FOR BIDS AND WAS AWARDED ON THE BASIS OF THE APPELLANT'S LOW BID, WHICH APPARENTLY WAS COMPUTED WITH THE USE OF ESTIMATES CONCERNING THE AMOUNTS OF VARIOUS CATEGORIES OF JANITORIAL SERVICES THAT WOULD BE REQUIRED DURING THE ONE-YEAR PERIOD OF THE PROPOSED CONTRACT. A BID BOND WAS REQUIRED TO BE SUBMITTED WITH EACH BID AND THE APPELLANT'S BID BOND WAS EXECUTED BY THE APPELLANT AND TWO INDIVIDUAL SURETIES WHO WERE OFFICERS OF THE APPELLANT. THE BOND WAS IN THE PROPER FORM AND IN THE CORRECT AMOUNT (20 PERCENT OF THE BID PRICE OF $271,476.37). IT PROVIDED IN PART THAT, IF THE SUCCESSFUL BIDDER FAILED TO ENTER INTO THE CONTRACT AND GIVE BONDS WITHIN THE TIME SPECIFIED, THE BIDDER WOULD BE HELD LIABLE FOR ANY DIFFERENCE BY WHICH THE COST OF PROCURING THE WORK EXCEEDED THE AMOUNT OF THE BID BOND, AND THE BID GUARANTEE WOULD BE AVAILABLE TOWARD OFFSETTING SUCH DIFFERENCE.

UNDER THE TERMS OF THE GOVERNMENT'S INVITATION FOR BIDS, THE ABOVE DESCRIBED PERFORMANCE AND PAYMENT BONDS WERE REQUIRED TO BE FURNISHED WITHIN THREE DAYS AFTER RECEIPT OF NOTIFICATION OF CONTRACT AWARD. ACCORDINGLY, WHEN THE AWARD NOTICE WAS GIVEN ON NOVEMBER 26, 1962, THE APPELLANT WAS REQUESTED TO FURNISH THE BONDS NOT LATER THAN NOVEMBER 29, 1962. THE INVITATION FOR BIDS ALSO CONTAINED A PROVISION THAT "THE GOVERNMENT RESERVES THE RIGHT TO REJECT ANY AND ALL BIDS AND WAIVE INFORMALITIES IN BIDS RECEIVED.' THE APPELLANT'S BID BOND WAS EXECUTED ON STANDARD FORM 24, BUT THERE WAS NO COMPLIANCE WITH THE REQUIREMENT OF THAT FORM WHICH STATES: "WHERE INDIVIDUAL SURETIES ARE USED, THIS BOND MUST BE ACCOMPANIED BY A COMPLETE AFFIDAVIT OF INDIVIDUAL SURETY FOR EACH INDIVIDUAL SURETY (STANDARD FORM 28).'

THE APPELLANT IS STATED TO HAVE PERFORMED JANITORIAL SERVICES AT THE TWO ARMY INSTALLATIONS DURING THE MONTHS OF DECEMBER 1962 AND JANUARY 1963. DURING THE MONTH OF DECEMBER 1962 THE APPELLANT "KEPT TRYING TO OBTAIN THE REQUIRED BONDS.' ON JANUARY 4, 1963, A TEN-DAY NOTICE WAS GIVEN BY TELEGRAM TO THE APPELLANT THAT THE GOVERNMENT CONSIDERED THE APPELLANT TO BE IN DEFAULT, AND THE APPELLANT WAS GIVEN AN OPPORTUNITY TO RECTIFY THE DEFICIENCY "UNTIL THE CLOSE OF BUSINESS ON 14 JANUARY 1963.' A MEETING WAS HELD ON THAT DATE AND, AGAIN, ON JANUARY 18, BUT THE APPELLANT FAILED TO SUBMIT THE BONDS AND AT THE LATTER MEETING THE APPELLANT WAS HANDED A NOTICE OF TERMINATION FOR DEFAULT EFFECTIVE AS OF JANUARY 31, 1963. THE APPELLANT CEASED OPERATIONS AT THE TWO ARMY INSTALLATIONS ON JANUARY 31, 1963, AND IN A LETTER DATED FEBRUARY 14, 1963, THE CONTRACTING OFFICER REQUESTED PAYMENT OF THE SUM OF $30,772.97 BY THE APPELLANT TO COVER THE EXCESS COST OF A REPROCUREMENT " EFFECTED AT A TOTAL ESTIMATED COST OF $257,003.00.'

THE BOARD'S DECISION STATES THAT THE GOVERNMENT IS HOLDING SOME MONEY EARNED BY THE APPELLANT DURING THE FIRST TWO MONTHS OF PERFORMANCE RELATED TO THE UNTERMINATED PORTION OF THE CONTRACT. THAT WITHHOLDING OF FUNDS WAS DONE TO OFFSET THE EXCESS COSTS BEING INCURRED FOR JANITORIAL SERVICES DURING THE REMAINING 10 MONTHS OF THE APPELLANT'S CONTRACT PERIOD. THE AMOUNT CLAIMED BY THE TRUSTEE IN BANKRUPTCY APPROXIMATES THE ESTIMATE OF EXCESS PROCUREMENT COSTS ($30,772.97) MADE IN THE CONTRACTING OFFICER'S LETTER OF FEBRUARY 14, 1963, TO THE APPELLANT.

THE BOARD CONCLUDED THAT THE APPELLANT'S FAILURE TO FURNISH THE BONDS WITHIN THREE DAYS AFTER RECEIPT OF NOTIFICATION OF CONTRACT AWARD, OR WITHIN THE EXTENDED TIME ALLOWED BY THE GOVERNMENT AFTER REQUISITE NOTICE WAS GIVEN, CLEARLY GAVE THE GOVERNMENT THE RIGHT TO TERMINATE THE CONTRACT, IN WHOLE OR IN PART, FOR DEFAULT, AS PROVIDED FOR IN THE DEFAULT CLAUSE OF THE GENERAL PROVISIONS MADE A PART OF THE CONTRACT. IN SUPPORT OF PENNINGTON, 228 F.SUPP. 374, IN WHICH THE DEFENDANT WAS HELD LIABLE FOR THE EXCESS COST OF A REPLACEMENT CONTACT WHICH WAS ENTERED INTO AFTER TERMINATION OF THE DEFENDANT'S CONTRACT FOR DEFAULT BECAUSE THE REQUIRED PERFORMANCE AND PAYMENT BONDS WERE NOT FURNISHED.

THE BOARD SPECIFICALLY DETERMINED THAT THE APPELLANT'S NONCOMPLIANCE WITH THE BOND-FURNISHING REQUIREMENT WAS NOT EXCUSABLE SINCE THE FAILURE TO FURNISH THE PERFORMANCE AND PAYMENT BONDS DID NOT RESULT FROM A CAUSE BEYOND THE APPELLANT'S CONTROL AND WITHOUT ITS FAULT OR NEGLIGENCE WITHIN THE MEANING OF THE DEFAULT CLAUSE. THE BOARD ALSO SPECIFICALLY DETERMINED THAT THERE WAS NO ENTITLEMENT TO A WAIVER OF THE BOND REQUIREMENTS, AND IT REFUSED TO DECLARE THE CONTRACT VOID BECAUSE THE APPELLANT'S BID BOND WAS NOT ACCOMPANIED WITH A FORM 28 IN JUSTIFICATION OF THE FINANCIAL RESPONSIBILITY OF THE INDIVIDUAL SURETIES WHO SIGNED THE BID BOND.

IN REGARD TO THE QUESTION OF WAIVER, AND AS AN INDICATION AS TO WHY THE BOARD CONSIDERED THAT THE FAILURE TO FURNISH THE BONDS WAS NOT DUE TO AN EXCUSABLE CAUSE WITHIN THE MEANING OF THE DEFAULT CLAUSE OF THE CONTRACT'S GENERAL PROVISIONS, THE FOLLOWING STATEMENTS ARE MADE AT PAGES 5 AND 6 OF THE BOARD'S DECISION:

"ALLEGEDLY, THE GOVERNMENT KNEW OR SHOULD HAVE KNOWN PRIOR TO THE AWARD THAT THE ONLY KIND OF SURETY BONDS WHICH THE APPELLANT COULD FURNISH WOULD BE BONDS OF THE SAME CHARACTER, WITH THE SAME SURETIES AND WITH THE SAME LACK OF JUSTIFICATION OF SURETIES AS OCCURRED WITH THE BID BOND. ALLEGEDLY, THE GOVERNMENT ELECTED TO DO WITHOUT BETTER BONDS THAN THE KIND EXEMPLIFIED BY THE BID BOND.

"THE RECORD WILL NOT SUPPORT A FINDING THAT THE GOVERNMENT KNEW OR SHOULD HAVE KNOWN BEFOREHAND THAT THE APPELLANT WOULD NOT BE ABLE TO OBTAIN PERFORMANCE AND PAYMENT BONDS. KNOWLEDGE OF DIFFICULTIES FIRST CAME TO THE ATTENTION OF THE GOVERNMENT AFTER THE AWARD OF THE CONTRACT.

"RESOURCES NEEDED BY INDIVIDUAL SURETIES FOR THE PERFORMANCE AND PAYMENT BONDS, WERE MUCH GREATER THAN FOR THE BID BOND. IT WAS THE RESPONSIBILITY OF THE APPELLANT (NOT THE GOVERNMENT) TO MAKE ARRANGEMENTS FOR THE BONDS THROUGH INDIVIDUALS OR BY AN APPROVED CORPORATE SURETY. THE RECORD IS CLEAR THAT NO BONDS WERE TENDERED TO THE GOVERNMENT, AND THE FAILURE TO DO SO RENDERED THE CONTRACTOR IN DEFAULT.

"WHETHER THE DEFAULT COULD HAVE OR SHOULD HAVE BEEN WAIVED BY THE CONTRACTING OFFICER WE ARE NOT CALLED UPON TO DECIDE IN THIS CASE. WOULD BE A MATTER FOR ADMINISTRATIVE DETERMINATION. NOT HAVING OCCURRED, THE BOARD LIMITS THE QUESTION TO WHETHER THE APPELLANT OR THE TRUSTEE IN BANKRUPTCY STANDING IN THE APPELLANT'S SHOES WAS ENTITLED AS A MATTER OF RIGHT TO HAVE THE REQUIREMENT FOR BONDS TO BE WAIVED.

"ON THE BASIS OF THE RECORD BEFORE US, THE BOARD FINDS THAT THERE WAS NO ENTITLEMENT TO A WAIVER OF THE BOND REQUIREMENTS.'

WITH RESPECT TO THE ARGUMENT THAT THE CONTRACT WAS VOID BECAUSE THE APPELLANT'S BID BOND WAS NOT ACCOMPANIED WITH AN EXECUTED FORM 28 IN JUSTIFICATION OF THE FINANCIAL RESPONSIBILITY OF THE INDIVIDUAL SURETIES, THE BOARD'S DECISION INDICATES THAT, IN MAKING THE CONTRACT AWARD, THE ABSENCE OF A FORM 28 WAS WAIVED BY THE CONTRACTING OFFICER AS A MINOR IRREGULARITY NOT AFFECTING THE VALIDITY OF THE BID BOND OR OF THE CONTRACT AWARD. THE BOARD CONSIDERED THAT THE BID BOND REPRESENTED A BINDING LEGAL OBLIGATION OF THE APPELLANT AND THE SURETIES IN FAVOR OF THE GOVERNMENT AND REFERRED TO CERTAIN EVIDENCE OF THE APPELLANT'S FINANCIAL RESPONSIBILITY AND CAPABILITY TO PERFORM THE PARTICULAR SERVICES WHICH HAD BEEN OBTAINED BY THE CONTRACTING OFFICER BEFORE ACCEPTANCE OF THE APPELLANT'S BID. APPARENTLY THE CONTRACTING OFFICER BELIEVED THAT THE EVIDENCE OBTAINED IN THE MATTER WAS SUFFICIENT TO JUSTIFY A CONCLUSION THAT THE APPELLANT QUALIFIED AS A RESPONSIBLE PROSPECTIVE CONTRACTOR.

THE BOARD STATED AT PAGE 3 OF ITS DECISION THAT THE INDIVIDUAL SURETIES WERE OFFICERS OF THE APPELLANT, AND THAT COUNSEL FOR THE TRUSTEE IN BANKRUPTCY DID NOT PRESENT EVIDENCE TO IMPUGN THEIR INTEGRITY IN SIGNING THE BID BOND NOR PROVE THAT EITHER OR BOTH WERE INCAPABLE FINANCIALLY OF MEETING THE OBLIGATION SET FORTH IN THE BID BOND. THE BOARD STATED AT PAGE 5 OF ITS DECISION THAT COUNSEL FOR THE TRUSTEE IN BANKRUPTCY HAD TAKEN THE POSITION THAT THE BID BOND WITHOUT A FORM 28 IN JUSTIFICATION OF THE FINANCIAL RESPONSIBILITY OF THE INDIVIDUAL SURETIES WAS IN EFFECT NO BID BOND, AND THAT THEY HAD CONTENDED ON THE BASIS OF SUCH PREMISE THAT THE BID HAD TO BE REJECTED UNDER SUBSECTION 2-404.2 OF THE ARMED SERVICES PROCUREMENT REGULATION. IN COMMENTING ON THOSE CONTENTIONS, THE DECISION OF THE BOARD STATES:

"WE AGREE THAT THE BID IN THIS CASE OUGHT TO HAVE BEEN REJECTED IF NO BID BOND OR OTHER GUARANTEE HAD BEEN FURNISHED, BUT THAT IS NOT THE ISSUE.

"HERE, A BID BOND WAS FURNISHED IN COMPLIANCE WITH THE REQUIREMENTS OF PARAGRAPHS 11 AND 11A, QUOTED ABOVE. WE DO NOT AGREE THAT THE BID HAD TO BE REJECTED. APPELLANT'S BID PRICE, THE QUANTITY, THE QUALITY AND PERFORMANCE OF THE SERVICES BEING PROCURED WERE NOT INFLUENCED BY THE LACK OF A FORM 28. AND THE TRUSTEE'S PRESENT POSITION IS WHOLLY INCONSISTENT WITH THE APPELLANT'S ACCEPTANCE OF AWARD WITHOUT PROTEST, AND WITH PERFORMANCE AND BILLING FOR TWO MONTHS.

"THE BOARD HAS CONSIDERED THE FACT THAT THE PRINTED INSTRUCTIONS ON THE BID BOND (FORM 24) STATED: "WHERE INDIVIDUAL SURETIES ARE USED, THIS BOND MUST BE ACCOMPANIED BY A COMPLETED AFFIDAVIT OF INDIVIDUAL SURETY FOR EACH INDIVIDUAL SURETY (STANDARD FORM 28).' TO THE SAME EFFECT WAS ARMY PROCUREMENT PROCEDURE 10-201.

"HOWEVER, NEITHER THE INSTRUCTIONS NOR THE SAID PROCEDURE INDICATED THAT A FAILURE TO FURNISH A FORM 28 WOULD REQUIRE A REJECTION OF A BID FROM CONSIDERATION FOR THE AWARD OF A CONTRACT.

"INFORMATION SUPPLIED ON A FORM 28 WAS SOLELY FOR THE BENEFIT OF THE GOVERNMENT. THE ABSENCE OF IT WOULD NOT BE PREJUDICIAL TO OTHER BIDDERS.

"IN VIEW OF THE ABOVE, THE BOARD REFUSES TO DECLARE THAT THE CONTRACT WAS VOID, AS REQUESTED.'

YOU TAKE EXCEPTION TO THE BOARD'S STATEMENT THAT COUNSEL FOR THE TRUSTEE IN BANKRUPTCY DID NOT PRESENT EVIDENCE TO IMPUGN THE INTEGRITY OF THE INDIVIDUAL SURETIES NOR PROVE THAT EITHER OR BOTH OF THEM WERE INCAPABLE OF MEETING THE OBLIGATION SET FORTH IN THE BID BOND. YOU ALSO TAKE EXCEPTION TO CERTAIN OF THE STATEMENTS MADE BY THE BOARD AT PAGES 5 AND 6 OF ITS DECISION, WHICH ARE QUOTED ABOVE.

REGARDING THOSE EXCEPTIONS, WE FIND NOTHING IN THE EXPLANATIONS GIVEN IN YOUR LETTER TO INDICATE ANY POSSIBILITY THAT THE REFERRED TO STATEMENTS OF THE BOARD WERE ERRONEOUS IN ANY RESPECT. OF COURSE, THE INDIVIDUAL SURETIES ON THE BID BOND COULD HAVE BEEN DESCRIBED AS HAVING BEEN BOTH OFFICERS AND SHAREHOLDERS OF THE FACILITIES MAINTENANCE CORPORATION, BUT THEIR DESIGNATION ONLY AS OFFICERS OF THE CORPORATION WAS SUFFICIENT FOR THE PURPOSE OF RENDERING A DECISION ON THE APPEAL. ALSO, YOUR LETTER CLEARLY SHOWS THAT NO RELIABLE EVIDENCE WAS SUBMITTED TO THE BOARD TO IMPUGN THE INTEGRITY OF THE INDIVIDUAL SURETIES OR TO PROVE THAT THEY WERE FINANCIALLY INCAPABLE OF MEETING THE OBLIGATION OF THE BID BOND WHICH THEY SIGNED. ADMITTEDLY, THE PRESENTATION OF SUCH EVIDENCE WAS IMPOSSIBLE BECAUSE THE INDIVIDUAL SURETIES WOULD NOT COOPERATE WITH COUNSEL FOR THE TRUSTEE IN BANKRUPTCY AND THE TRUSTEE WAS UNABLE TO COMPEL THEM TO APPEAR AND TESTIFY AT THE BOARD HEARING.

WITH RESPECT TO YOUR CONTENTION THAT AFFIDAVITS WERE SUBMITTED TO THE BOARD TO THE EFFECT THAT IT IS A PRACTICE OF CORPORATE SURETIES NOT TO EXECUTE A BID BOND UNLESS THE CONDITION OF THE BIDDER WOULD PERMIT ALL BONDS TO BE WRITTEN FOR THE CONTRACT, IT NEVERTHELESS APPEARS THAT THE BOARD WAS JUSTIFIED IN STATING THAT THE RESOURCES NEEDED BY INDIVIDUAL SURETIES FOR THE PERFORMANCE AND PAYMENT BONDS WERE MUCH GREATER THAN FOR THE BID BOND; AND THAT IT WAS THE RESPONSIBILITY OF THE APPELLANT (NOT THE GOVERNMENT) TO MAKE ARRANGEMENTS FOR THE BONDS THROUGH INDIVIDUALS OR BY AN APPROVED CORPORATE SURETY. THE GUARANTEE ON THE BID BOND WAS CONSIDERABLY LESS THAN THE AMOUNT OF EITHER THE REQUIRED PERFORMANCE BOND OR THE REQUIRED PAYMENT BOND AND IT IS EVIDENT THAT A CORPORATE SURETY WOULD NOT AUTOMATICALLY REFUSE TO MAKE A COMMITMENT TO SUPPLY PERFORMANCE AND PAYMENT BONDS IF A BIDDER ELECTED TO SUBMIT A BID BOND WITH INDIVIDUAL SURETIES.

SINCE THERE IS APPARENTLY NO MATERIAL DISPUTE CONCERNING THE FACTS OF THE CASE, AS OUTLINED IN THE DECISION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS, IT IS OUR VIEW THAT IT SHOULD NOT BE NECESSARY FOR OUR OFFICE TO OBTAIN AND CONSIDER THE COMPLETE RECORD OF THE BOARD RELATIVE TO THE APPEAL OF THE FACILITIES MAINTENANCE CORPORATION IN CONNECTION WITH OUR CONSIDERATION OF THE CLAIM PRESENTED ON BEHALF OF THE TRUSTEE IN BANKRUPTCY. SEE C. J. LANGENFELDER AND SON, INC. V. UNITED STATES, CT.CL. 291-63, FEBRUARY 19, 1965.

IN THE PRESENT CASE, THE ARMED SERVICES BOARD OF CONTRACT APPEALS CONSIDERED THAT IT WAS THE RESPONSIBILITY OF THE APPELLANT TO MAKE THE NECESSARY ARRANGEMENTS FOR THE FURNISHING OF THE REQUIRED PERFORMANCE EXCUSABLE WITHIN THE MEANING OF THAT PART OF THE DEFAULT CLAUSE OF THE CONTRACT WHICH PROVIDED FOR EXCUSING A FAILURE TO COMPLY WITH THE TERMS OF THE CONTRACT WHEN SUCH FAILURE IS DUE TO CERTAIN CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR. WE BELIEVE THAT THE CONCLUSION OF THE BOARD WAS PROPER, OR AT LEAST NOT SO CLEARLY ERRONEOUS AS TO JUSTIFY EITHER OUR OFFICE OR THE COURTS IN TAKING FINAL ADMINISTRATIVE DECISIONS UNDER DISPUTES CLAUSES OF GOVERNMENT CONTRACTS, AS SET FORTH IN THE ACT OF MAY 11, 1954, 68 STAT. 81, 41 U.S.C. 321, 322. AS THE BOARD HAS STATED, THE APPELLANT KNEW, WHEN IT SUBMITTED ITS BID TOGETHER WITH A BID BOND, THAT THE PERFORMANCE AND PAYMENT BONDS WOULD BE REQUIRED WITHIN THREE DAYS AFTER THE AWARD OF THE CONTRACT. IN OUR OPINION, THE FAILURE TO MAKE THE NECESSARY ARRANGEMENTS FOR COMPLIANCE WITH THAT REQUIREMENT BEFORE SUBMITTING A BID WOULD NECESSARILY HAVE REQUIRED THE CONCLUSION THAT A FAILURE TO FURNISH THE BONDS COULD NOT BE EQUATED WITH ONE OR MORE OF THE ENUMERATED CAUSES FOR EXCUSING PERFORMANCE AS SET FORTH IN THE DEFAULT CLAUSE OF THE CONTRACT'S GENERAL PROVISIONS.

WITH RESPECT TO THE QUESTION AS TO WHETHER THE BOND-FURNISHING REQUIREMENT WAS WAIVED BY THE GOVERNMENT, AND THE QUESTION AS TO WHETHER ACCEPTANCE OF THE APPELLANT'S BID RESULTED IN A BINDING CONTRACT, THE FACTS CONCERNING THE APPELLANT'S DEFAULT ARE SIMILAR IN MOST RESPECTS TO THOSE CONSIDERED IN UNITED STATES V. CORRIE C. PENNINGTON, SUPRA. THE CONTRACT IN THAT CASE WAS NOT TERMINATED UNTIL JULY 21, 1960, ALTHOUGH THE AWARD WAS MADE ON MAY 9, 1960. HOWEVER, THE GOVERNMENT WAS AT ALL TIMES INSISTING UPON THE FURNISHING OF THE REQUIRED BONDS AND THE DEFENDANT CONTENDED ONLY THAT NO CONTRACT COULD COME INTO BEING UNTIL THE REQUIRED BONDS WERE POSTED. THE UNITED STATES DISTRICT COURT REJECTED THAT CONTENTION, STATING THAT "UPON ACCEPTANCE OF RESPONDENT'S BID, A VALID CONTRACT CAME INTO EXISTENCE BETWEEN PETITIONER AND RESPONDENT.' THERE IS A DIFFERENCE BETWEEN THE TWO CASES IN THAT THE FACILITIES MAINTENANCE CORPORATION WAS PERMITTED TO COMMENCE CONTRACT PERFORMANCE BEFORE FURNISHING THE BONDS BUT WE DO NOT CONSIDER THAT CIRCUMSTANCES AS HAVING AMOUNTED TO A RELINQUISHMENT OF THE LEGAL RIGHT WHICH THE GOVERNMENT HAD ACQUIRED UNDER THE TERMS OF THE APPELLANT'S ACCEPTED BID TO INSIST UPON THE FURNISHING OF THE REQUIRED PERFORMANCE AND PAYMENT BONDS. THE FACT THAT THE APPELLANT KEPT TRYING DURING DECEMBER 1962 TO OBTAIN THE BONDS AND THAT FORMAL NOTICE DEMANDING SAME WAS GIVEN THE APPELLANT ON JANUARY 4, 1963, CLEARLY INDICATES THAT THERE WAS NO INTENTION ON THE PART OF THE GOVERNMENT TO ABANDON THAT RIGHT.

WITH PARTICULAR REFERENCE TO THE CONCLUSIONS OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS CONCERNING THE QUESTIONED VALIDITY OF THE BID BOND, YOU SUGGEST THAT THE BOARD IS QUITE IN ERROR IN RELYING UPON THE FACT THAT THE INVITATION FOR BIDS IN THIS CASE DID NOT EXPRESSLY SAY THAT THE FAILURE TO FURNISH A STANDARD FORM 28 WOULD REQUIRE A REJECTION OF THE BID. YOU STATE THAT THIS POSITION OF THE BOARD IS TANTAMOUNT TO SAYING THAT A MATERIAL REQUIREMENT, MADE SO BY REGULATION HAVING THE FORCE OF LAW, CAN CEASE TO BE A MATERIAL REQUIREMENT OF THE BID IN THE DISCRETION (OR BY THE INADVERTENCE) OF THE CONTRACTING OFFICER WHO DRAFTS THE INVITATION. YOU CONTEND THAT THIS POSITION IS BASICALLY UNSOUND AND ERRONEOUS AND THAT A SIMILAR POSITION HAS BEEN EXPRESSLY REJECTED BY OUR OFFICE IN DECISION NO. B 154899, DATED DECEMBER 22, 1964. THERE WAS INVOLVED IN THAT CASE THE FAILURE OF A BIDDER TO QUOTE ON ALL OF THE ALTERNATES AS REQUIRED BY THE TERMS OF THE INVITATION AND AS PRESCRIBED IN A PROVISION OF THE ARMED SERVICES PROCUREMENT REGULATION.

IN A DECISION OF OUR OFFICE RENDERED ON FEBRUARY 5, 1959, 38 COMP. GEN. 532, IT WAS DETERMINED FOR THE REASONS STATED THEREIN THAT, AFTER A SPECIFIED PERIOD OF TIME, WE SHOULD NO LONGER FOLLOW THE RULE THAT A REQUIREMENT FOR A BID BOND IN AN INVITATION FOR BIDS MAY AND SHOULD BE WAIVED IF THE FAILURE TO COMPLY IS DUE TO INADVERTENCE OR OTHER EXCUSABLE CAUSE NOT RELATED TO THE BIDDER'S FINANCIAL ABILITY TO SECURE THE BOND. ALTHOUGH THE SUBMISSION OF A BID BOND WOULD CONSTITUTE EVIDENCE PRIMARILY RELATING TO THE BIDDER'S FINANCIAL RESPONSIBILITY, RATHER THAN TO THE SUBSTANCE OF HIS BID, IT HAS BEEN OUR POSITION SINCE THE DATE OF THAT DECISION THAT THE FAILURE TO SUBMIT A BID BOND WHEN REQUIRED BY THE TERMS OF THE INVITATION FOR BIDS SHOULD BE REGARDED AS A MATERIAL DEVIATION FROM THE REQUIREMENTS OF THE INVITATION SO AS TO MAKE THE BID NONRESPONSIVE, NOTWITHSTANDING THE QUESTION AS TO WHETHER OR NOT THE BIDDER'S FINANCIAL CONDITION AND CAPABILITY OF PERFORMANCE WERE SUCH AS TO MEET THE REQUIREMENTS FOR QUALIFICATION AS A RESPONSIBLE PROSPECTIVE CONTRACTOR FOR FURNISHING THE PARTICULAR SUPPLIES OR SERVICES. THE DECISION WAS RENDERED IN THE INTEREST OF MAINTAINING THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM AND IT HAS BEEN JUDICIALLY DETERMINED IN A CASE WHERE THE PARTICULAR RULE WAS APPLIED THAT THE COURTS SHOULD NOT INTERFERE AND REQUIRE A RECONSIDERATION OF THE REJECTED BID. SEE UNITED STATES V. STEWART, U.S.D.C. D.C., 234 F.SUPP. 94, AFFIRMED BY PER CURIAM DECISION OF THE UNITED STATES COURT OF APPEALS, DISTRICT OF COLUMBIA CIRCUIT, 339 F.2D 753.

HOWEVER, NEITHER THE RULE SET FORTH IN OUR DECISION OF FEBRUARY 5, 1959, NOR THE EXISTENCE OF ANY ADMINISTRATIVE REGULATION CONCERNING THE SUBMISSION OF AN EXECUTED STANDARD FORM 28 WITH A BID BOND SIGNED BY INDIVIDUAL SURETIES, WOULD PROVIDE A SUFFICIENT LEGAL BASIS FOR CONCLUDING THAT THE CONTRACT HERE INVOLVED WAS NOT BINDING UPON THE APPELLANT.

IT HAS BEEN HELD THAT SUCCESSFUL BIDDERS ARE NOT IN A POSITION TO MAINTAIN THAT THEY ARE NOT BOUND BY THE TERMS OF THEIR ACCEPTED BIDS SOLELY ON ACCOUNT OF ADMINISTRATIVE FAILURE TO COMPLY WITH STATUTORY PROVISIONS OR THE REQUIREMENTS OF INVITATIONS FOR BIDS. AS POINTED OUT BY THE SUPREME COURT OF THE UNITED STATES IN THE CASE OF UNITED STATES V. PUERTO RICO STEAMSHIP COMPANY, 239 U.S. 88, 93, EVEN WHERE A STATUTE WHOSE PROTECTION THE REQUIREMENT IS MADE OFTEN MAY WAIVE IT, VOID BEING HELD TO MEAN ONLY VOIDABLE AT THE PARTY'S CHOICE.' SEE, ALSO, ADALHARDT CONSTRUCTION CO. V. UNITED STATES, 123 CT.CL. 456, 107 F.SUPP. 845, IN WHICH THE CONTRACT AWARD WAS HELD TO BE BINDING UPON THE PLAINTIFF ALTHOUGH IT HAD NOT SUBMITTED A BID BOND AS REQUIRED BY THE TERMS OF THE APPLICABLE INVITATION FOR BIDS.

ACCORDINGLY, WE FIND NO LEGAL BASIS FOR CONCLUDING THAT THE APPELLANT IN THIS CASE IS NOT LIABLE TO THE GOVERNMENT FOR THE EXCESS COST INCURRED AS THE RESULT OF ITS DEFAULT UNDER ARMY CONTRACT NO. DA 04-197-AMC-16 (M). COPY OF THIS DECISION IS BEING FORWARDED TO THE DEPARTMENT OF THE ARMY WITH THE ADVICE THAT THE ACTUAL AMOUNT OF SUCH LIABILITY SHOULD BE DETERMINED AND THAT APPROPRIATE ACTION SHOULD BE TAKEN TO RECOVER ANY BALANCE REMAINING DUE THE GOVERNMENT, OR TO PAY THE TRUSTEE IN BANKRUPTCY THE DIFFERENCE BETWEEN THE AMOUNT OF THE EXCESS COST LIABILITY AND THE SUM WITHHELD FROM PAYMENT TO THE APPELLANT FOR SERVICES RENDERED DURING THE MONTHS OF DECEMBER 1962 AND JANUARY 1963, IF THE AMOUNT WITHHELD EXCEEDS THE EXCESS COST LIABILITY.