B-103842, MARCH 25, 1952, 31 COMP. GEN. 477

B-103842, MARCH 25, 1952, 31 COMP. GEN. 477

BID BONDS - BIDDER'S AND SURETY'S LIABILITY THE LIABILITY OF A BIDDER AND HIS SURETY ON A BID BOND ACCOMPANYING A BID IS FIXED UPON THE BIDDER'S REFUSAL TO ENTER INTO A FORMAL CONTRACT TENDERED IT, EVEN THOUGH THE CONTRACT BY ITS EXPRESS TERMS WAS NOT BINDING UNTIL FORMALLY APPROVED BY HIGHER AUTHORITY.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE ARMY, MARCH 25, 1952:

REFERENCE IS MADE TO LETTER OF DECEMBER 28, 1951, FROM THE UNDER SECRETARY OF THE ARMY, FORWARDING ADDITIONAL INFORMATION AND PERTINENT PAPERS REQUIRED IN CONNECTION WITH RECONSIDERATION OF OFFICE DECISION DATED SEPTEMBER 6, 1951, B-103842, 31 COMP. GEN. 76, WHEREIN YOU WERE ADVISED, IN RESPONSE TO REQUEST OF MAY 29, 1951, THAT BLUM ELECTRIC, INCORPORATED, WAS OBLIGATED TO INSTALL CERTAIN ELECTRICAL EQUIPMENT AT FORT HAYES, COLUMBUS, OHIO, FOR THE SUM OF $26,200, IN ACCORDANCE WITH ITS BID SUBMITTED IN RESPONSE TO INVITATION FOR BIDS NO.33-023-51-14, DATED NOVEMBER 24, 1950.

THE DECISION OF SEPTEMBER 6, 1951, WAS BASED ON THE FACTS OF RECORD, AS STATED THEREIN, WHICH INDICATED THAT THE CORPORATION'S BID ON THE WORK HAD BEEN DULY ACCEPTED. THERE NOW HAS BEEN FURNISHED A COPY OF THE NOTICE OF AWARD DATED DECEMBER 14, 1950, WHICH READS AS FOLLOWS:

YOU ARE HEREBY NOTIFIED THAT YOUR BID DATED 14 DECEMBER 1950 IN THE SUM OF $26,200.00 COVERING THE INSTALLATION OF NEW ELECTRIC SERVICE PANELS, SWITCHES, CONDUIT, WIRING, AND TRANSFORMERS IN BUILDING NO. 110 FORT HAYES, COLUMBUS 18, OHIO, IS ACCEPTED. A FORMAL CONTRACT BEARING THE ABOVE CONTRACT NUMBER WILL BE PREPARED FOR EXECUTION. ACCEPTABLE PERFORMANCE AND PAYMENT BONDS MUST BE FURNISHED UPON EXECUTION OF THE FORMAL CONTRACT. IF APPROVAL OF THE CONTRACT IS REQUIRED BY ITS EXPRESS TERMS THE CONTRACT IS NOT FULLY EXECUTED UNTIL SUCH APPROVAL IS OBTAINED.

THE FORMAL CONTRACT SUBMITTED TO THE CORPORATION FOR SIGNATURE CONTAINS ON THE FIRST PAGE THEREOF THE FOLLOWING STATEMENT:

THE INSTRUMENT SHALL BE SUBJECT TO THE WRITTEN APPROVAL BY OR ON BEHALF OF THE COMMANDING GENERAL HEADQUARTERS SECOND ARMY, AND SHALL NOT BE BINDING UNTIL SO APPROVED.

IT IS STATED TO BE THE OPINION OF THE CONTRACTING OFFICER AND THE LEGAL OFFICER AT FORT HAYES, COLUMBUS, OHIO, THAT SINCE THE FORMAL CONTRACT REQUIRED APPROVAL BY ITS EXPRESS TERMS, THE NOTICE OF AWARD, WAS NOT AN UNCONDITIONAL ACCEPTANCE OF THE BID AND, THEREFORE, SINCE THE FORMAL CONTRACT WAS NOT APPROVED IN WRITING BY HIGHER AUTHORITY THERE WAS NO BINDING CONTRACT AT ANY TIME.

IT IS WELL SETTLED THAT WHERE A CONTRACT CONTAINS A CLAUSE WHICH MAKES ITS FINAL EXECUTION DEPENDENT UPON THE APPROVAL OF THE HEAD OF A DEPARTMENT OR SOME SUPERVISING OFFICIAL OF THE GOVERNMENT, IT IS NOT A BINDING OBLIGATION UNTIL SUCH APPROVAL IS HAD. SEE MONROE V. UNITED STATES, 184 U.S. 524; LITTLE FALLS KNITTING MILL COMPANY V. UNITED STATES, 44 C.1CLS. 1, 17; M. K. CATHELL ET AL. V. UNITED STATES, 46 ID. 368, 371; AUGUST C. BRANT V. UNITED STATES, 46 ID. 409, 15; AND GEORGE GRIFFITHS CONSTRUCTION COMPANY V. UNITED STATES, 77 ID. 542, 550. MOREOVER, WHILE THE AWARD OF DECEMBER 14, 1950, PURPORTED TO OBLIGATE BLUM ELECTRIC, INC., THE GOVERNMENT WAS NOT TO BE OBLIGATED UNTIL THE FORMAL CONTRACT WAS APPROVED IN WRITING BY OR ON BEHALF OF THE COMMANDING GENERAL, HEADQUARTERS SECOND ARMY. TO BE ENFORCEABLE A CONTRACT MUST BIND BOTH PARTIES. DAVIS V. DAVIS, DIRECTOR GENERAL OF RAILROADS, 151 N.E. 134, 135. ALSO, AN ACCEPTANCE TO BE EFFECTIVE MUST BE UNEQUIVOCAL AND UNCONDITIONAL. 12 AM. JR. CONTRACTS, SECTION 53. MUTUALITY OF OBLIGATION IS AN ESSENTIAL ELEMENT OF EVERY ENFORCEABLE CONTRACT AND WHERE ONLY ONE PARTY IS BOU,D MUTUALITY IS ABSENT. 17 C.J.S. 454. SEE ALSO, UNITED STATES V. MITCHELL, 104 F.2D 343, 346. CONSEQUENTLY, IN VIEW OF THE ADDITIONAL FACTS NOW PRESENTED IT MUST BE CONCLUDED THAT THE CONDITIONAL ACCEPTANCE OF THE CORPORATION'S BID DID NOT RESULT IN A VALID AND BINDING CONTRACT.

HOWEVER, THE BID OF BLUM ELECTRIC, INC., WAS ACCOMPANIED BY A BID BOND WHEREBY BLUM ELECTRIC, INCORPORATED, AS PRINCIPAL, AND THE GLOBE INDEMNITY COMPANY, AS SURETY, WERE JOINTLY AND SEVERALLY AND EQUALLY BOUND TO THE UNITED STATES IN THE PENAL SUM OF $3,000, THE CONDITION OF THE BOND BEING, IN SUBSTANCE, THAT IF THE BID OF BLUM ELECTRIC, INC., AS SUBMITTED SHOULD BE ACCEPTED, THE BIDDER WOULD ENTER INTO A FORMAL CONTRACT AND WOULD FURNISH ADEQUATE AND SATISFACTORY BONDS FOR ITS PERFORMANCE, OTHERWISE THE BID BOND WAS "TO REMAIN IN FULL FORCE AND VIRTUE.' CONSEQUENTLY, WHEN BLUM ELECTRIC, INC., FAILED TO SIGN THE FORMAL CONTRACT TENDERED IT, AS PROVIDED IN THE BID BOND, SAID BOND WAS IN FULL FORCE AND EFFECT, AND THE BIDDER AND THE SURETY WERE FORTHWITH JOINTLY AND SEVERALLY AND COEQUALLY BOUND TO THE GOVERNMENT IN THE SUM OF $3,000.

ACCORDINGLY, THERE SHOULD BE COLLECTED THE SUM OF $3,000 FROM BLUM ELECTRIC, INC., BY WAY OF SET-OFF AGAINST OR WITHHOLDING FROM AMOUNTS OTHERWISE DUE IT UNDER OTHER CONTRACTS WITH THE GOVERNMENT, IF ANY; OTHERWISE DEMAND SHOULD BE MADE ON THE SURETY FOR THE AMOUNT DUE THE GOVERNMENT UNDER THE BID BOND.