B-104399, AUGUST 7, 1951, 31 COMP. GEN. 20

B-104399: Aug 7, 1951

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ARE NOT INTENDED TO DEPRIVE GOVERNMENT CONTRACTING OFFICERS OF THE RIGHT TO WAIVE INFORMALITIES IN BIDS. THE CORRECTION OF A DEFICIENCY IN FAILING TO FURNISH A BID BOND SHOULD BE PERMITTED ONLY AFTER AN INVESTIGATION WHICH ESTABLISHES CLEARLY THAT THE DEFICIENCY WAS DUE SOLELY TO OVERSIGHT OR SOME OTHER EXCUSABLE CAUSE AND NOT DUE TO THE CONTRACTOR'S INABILITY TO OBTAIN A BID BOND BECAUSE OF ITS FINANCIAL STATUS OR SOME SIMILAR REASON. 1951: REFERENCE IS MADE TO LETTER OF JULY 24. THAT A NONSTATUTORY BID BOND IS NOT AN ESSENTIAL REQUIREMENT OF AN INVITATION TO BID AND THAT A FAILURE TO FURNISH SUCH A BOND IS AN INFORMALITY OR IRREGULARITY WHICH CONTRACTING OFFICERS MAY PERMIT TO BE CURED IF SUCH ACTION BE IN THE PUBLIC INTEREST.

B-104399, AUGUST 7, 1951, 31 COMP. GEN. 20

BID BONDS - WAIVERS BY CONTRACTING OFFICER THE ARMED SERVICES PROCUREMENT ACT OF 1947 AND THE ARMED SERVICES PROCUREMENT REGULATIONS, PROVIDING THAT AWARD OF CONTRACTS SHALL BE MADE TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION FOR BIDS, ARE NOT INTENDED TO DEPRIVE GOVERNMENT CONTRACTING OFFICERS OF THE RIGHT TO WAIVE INFORMALITIES IN BIDS; HOWEVER, THE CORRECTION OF A DEFICIENCY IN FAILING TO FURNISH A BID BOND SHOULD BE PERMITTED ONLY AFTER AN INVESTIGATION WHICH ESTABLISHES CLEARLY THAT THE DEFICIENCY WAS DUE SOLELY TO OVERSIGHT OR SOME OTHER EXCUSABLE CAUSE AND NOT DUE TO THE CONTRACTOR'S INABILITY TO OBTAIN A BID BOND BECAUSE OF ITS FINANCIAL STATUS OR SOME SIMILAR REASON.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE NAVY, AUGUST 7, 1951:

REFERENCE IS MADE TO LETTER OF JULY 24, 1951, FROM THE ASSISTANT SECRETARY OF THE NAVY, WRITTEN IN RESPONSE TO A REQUEST BY THIS OFFICE FOR A REPORT CONCERNING A PROTEST BY T. F. SCHOLES, INC., AGAINST THE AWARD OF A CONTRACT BY THE NAVY DEPARTMENT FOR THE EXTENSION AND REPAIR OF THE RAILROAD SYSTEM AT THE NAVAL AMMUNITION DEPOT, EARLE, NEW JERSEY, TO ANY CONTRACTOR OTHER THAN THAT CONCERN. IN ADDITION TO THE REPORT AND INFORMATION FURNISHED THEREIN, THE SAID LETTER OF JULY 24 REQUESTS AN OPINION AS TO WHETHER THE EARLIER RULINGS OF THIS OFFICE TO THE EFFECT, GENERALLY, THAT A NONSTATUTORY BID BOND IS NOT AN ESSENTIAL REQUIREMENT OF AN INVITATION TO BID AND THAT A FAILURE TO FURNISH SUCH A BOND IS AN INFORMALITY OR IRREGULARITY WHICH CONTRACTING OFFICERS MAY PERMIT TO BE CURED IF SUCH ACTION BE IN THE PUBLIC INTEREST, ARE TO BE FOLLOWED IN VIEW OF THE PROVISIONS OF SECTION 3 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 62 STAT. 22 (41 U.S.C. 152 (B) (, AND THE ARMED SERVICES PROCUREMENT REGULATIONS. IN OTHER WORDS, THE DEPARTMENT OF THE NAVY REQUESTS TO BE ADVISED WHETHER A BID IS TO BE DISREGARDED AS UNRESPONSIVE WHEN IT IS NOT ACCOMPANIED BY A BID BOND AS REQUIRED BY AN INVITATION TO BID, IRRESPECTIVE OF THE REASONS FOR THE FAILURE TO FURNISH A BOND.

INASMUCH AS SUCH PROVISIONS OF LAW AND THE REGULATIONS MUST BE CONSIDERED IN CONNECTION WITH THE PROTEST BY T. F. SCHOLES, INC., WHOSE BID WAS NOT ACCOMPANIED BY A BID BOND, THE QUESTION AS TO WHETHER SUCH PROVISIONS REQUIRE A CHANGE IN THE PREVIOUS DECISIONS OF THIS OFFICE WITH RESPECT TO SUCH MATTER WILL BE FIRST DISCUSSED.

THE GENERAL RULE APPLICABLE IN THE MATTER HAS GROWN OUT OF A NUMBER OF DECISIONS BASED ON THE ADVERTISING REQUIREMENTS OF SECTION 3709, REVISED STATUTES. THE SAID RULE IS SUMMARIZED IN DECISION OF NOVEMBER 8, 1950, 30 COMP. GEN. 179, WHEREIN IT IS STATED---

THE QUESTION AS TO WHETHER DEVIATIONS FROM THE REQUIREMENTS OF ADVERTISED SPECIFICATIONS MIGHT BE WAIVED AFTER THE OPENING DATE HAS BEEN BEFORE THIS OFFICE MANY TIMES; AND IT HAS BEEN CONSISTENTLY HELD THAT SUCH DEVIATIONS MAY BE WAIVED PROVIDED THEY DO NOT GO TO THE SUBSTANCE OF THE BID OR WORK AN INJUSTICE TO OTHER BIDDERS. IN OTHER WORDS, THE PRIMARY QUESTION FOR DETERMINATION IN THIS AND SIMILAR CASES IS WHETHER THE DEVIATION PROPOSED TO BE WAIVED GOES TO THE SUBSTANCE OF THE BID SO AS TO AFFECT EITHER THE PRICE, QUANTITY, OR QUALITY OF THE ARTICLES OFFERED AND THEREFORE IS PREJUDICIAL TO THE RIGHTS OF OTHER BIDDERS OR IS MERELY A MATTER OF FORM OR SOME IMMATERIAL VARIATION FROM THE EXACT REQUIREMENTS OF THE SPECIFICATIONS SUCH AS WOULD NOT AFFECT EITHER THE PRICE, QUALITY, OR QUANTITY OF THE ARTICLES OFFERED.

IT WILL BE SEEN FROM THE ABOVE THAT THE QUESTION AS TO WHETHER DEVIATIONS FROM THE REQUIREMENTS OF ADVERTISED SPECIFICATIONS OR FROM THE INVITATION TO BID MAY BE WAIVED IS DEPENDENT UPON THE PARTICULAR FACTS AND CIRCUMSTANCES PRESENT IN THE INDIVIDUAL CASE. WHILE THE FAILURE TO FURNISH A BID BOND WAS NOT INVOLVED IN SUCH CASE THE GENERAL RULE STATED THEREIN HAS BEEN CONSISTENTLY FOLLOWED BY THIS OFFICE IN DECISIONS INVOLVING BID BONDS.

AN EARLY DECISION BY THIS OFFICE IN CONNECTION WITH THE FAILURE TO SUBMIT A BID BOND IN ACCORDANCE WITH THE INVITATION TO BID APPEARS IN 7 COMP. GEN. 568, UNDER DATE OF MARCH 14, 1928, AND READS IN PERTINENT PART AS FOLLOWS:

THE GUARANTEE REQUIRED TO BE SUBMITTED WITH BIDS IS FOR THE PURPOSE OF INSURING THAT THE SUCCESSFUL BIDDER WILL EXECUTE THE CONTRACT AND GIVE THE NECESSARY CONTRACT BOND FOR FAITHFUL PERFORMANCE OF SAID CONTRACT; IN OTHER WORDS, THE PURPOSE OF THE GUARANTY TO ACCOMPANY THE BID IS TO SECURE BONA FIDE BIDDERS FOR PUBLIC WORK AND TO MAKE THE GOVERNMENT WHOLE, IN EVENT A SUCCESSFUL BIDDER SHOULD FAIL OR REFUSE TO EXECUTE A CONTRACT IN ACCORDANCE WITH HIS PROPOSAL, SHOULD IT BE ACCEPTED, AND TO GIVE THE NECESSARY PERFORMANCE BOND. THE FAILURE TO ACCOMPANY A BID WITH THE REQUIRED AMOUNT OF GUARANTEE IS AN IRREGULARITY WHICH DOES NOT REQUIRE IMMEDIATE REJECTION OF THE BID BUT MAY BE EXPLAINED AND UPON PROPER FACTS BE WAIVED BY THE UNITED STATES IN EVENT IT IS TO ITS INTEREST SO TO DO. THIS IS TRUE IN THE PRESENT MATTER, WHERE THE BIDDER APPEARS NOT TO HAVE BEEN FURNISHED A COPY OF THE INVITATION FOR BIDS AND WAS NOT INFORMED OF THE EXACT AMOUNT OF GUARANTEE REQUIRED TO ACCOMPANY HIS BID, BUT WHO CONSULTED SURETIES IN THE PRACTICE OF GIVING BONDS FOR THE PERFORMANCE OF GOVERNMENT CONTRACTS AND WAS NOTIFIED THAT A CERTIFIED CHECK IN THE AMOUNT OF 5 PERCENT OF HIS BID WOULD PROBABLY BE SUFFICIENT. THERE APPEARS TO HAVE BEEN NO LACK OF GOOD FAITH IN THE MATTER, AND AS MR. GRAFF APPEARS WILLING TO EXECUTE THE CONTRACT AND GIVE THE NECESSARY PERFORMANCE BOND AND AS HIS BID IS CONSIDERABLY LOWER THAN THE NEXT LOWEST BID, THE INTERESTS OF THE UNITED STATES APPEAR AND THE IRREGULARITY IN THE BID MAY BE WAIVED.

IN DECISION OF OCTOBER 11, 1934, 14 COMP. GEN. 305, THERE WAS CONSIDERED THE CASE OF A BIDDER WHO ACCOMPANIED HIS BID WITH A LETTER STATING THAT, DUE TO LACK OF TIME, HE HAD BEEN UNABLE TO PROCURE A BID BOND, BUT THAT, IF AWARDED THE CONTRACT, HE PROPOSED TO FURNISH A PERFORMANCE BOND IN ACCORDANCE WITH THE SPECIFICATIONS. SUCH BID WAS $261,551 LESS THAN THE NEXT LOWEST QUALIFIED BID. THE DEPARTMENT OF THE ARMY RECOMMENDED THAT AWARD NOT BE MADE TO SUCH BIDDER FOR THE REASON THAT FAILURE TO ENFORCE THE REQUIREMENT THAT BID BONDS OR CERTIFIED CHECKS BE SUBMITTED WITH THE BIDS IN ACCORDANCE WITH ADVERTISED SPECIFICATIONS WOULD MAKE POSSIBLE THE BROKERING OR SELLING OF ONTRACTS; THAT IT WOULD NOT MAINTAIN THE CARDINAL PRINCIPLES OF FAIR AND EQUAL RIGHTS TO ALL; THAT IT WOULD NOT ACCORD WITH THE SPIRIT OF THE CODES OF FAIR COMPETITION; AND THAT IT WOULD NOT MAINTAIN THE PRINCIPLE OF COMPETITIVE BIDDING. IN REPLY TO SUCH PROTESTS AND IN HOLDING THAT, SINCE THE LOWEST BIDDER SUBSEQUENTLY FURNISHED A BID BOND, APPROPRIATED MONEYS WERE NOT AVAILABLE FOR MAKING PAYMENT IN EXCESS OF SUCH LOW BID IT WAS STATED THAT---

THE UNITED STATES HAS THE RIGHT TO WAIVE INFORMALITIES IN BIDS WHEN SUCH WAIVER IS IN THE PUBLIC INTEREST, AND, OF COURSE, IT IS IN THE PUBLIC INTEREST TO SAVE THE SUM OF $261,551, THE DIFFERENCE BETWEEN THE BID SUBMITTED BY THE CENTRAL BRIDGE AND CONSTRUCTION CO. AND THE BID SUBMITTED BY SIX COMPANIES OF WASHINGTON, INC.

A BID BOND IS MERELY A GUARANTEE THAT IN EVENT THE BID IS ACCEPTED THE BIDDER WILL EXECUTE THE REQUIRED CONTRACT AND FURNISH THE REQUIRED PERFORMANCE BOND, BUT THE FAILURE TO SUBMIT SUCH A BID BOND DOES NOT AFFECT THE LEGAL OBLIGATION THAT WHEN THE BID IS ACCEPTED THERE ARISES A CONTRACT BINDING ON THE CONTRACTOR TO PERFORM IN ACCORDANCE WITH THE TERMS OF THE ACCEPTED BID OR TO PAY THE UNITED STATES ANY DAMAGES RESULTING FROM FAILURE TO DO SO. SEE UNITED STATES V. NEW YORK AND PORTO RICO STEAMSHIP CO., 239 U.S. 88, AND PURCELL ENVELOPE CO. V. UNITED STATES, 249 U.S. 313. CONSEQUENTLY IT IS NOT CORRECT TO SUGGEST THAT THE WAIVER BY THE GOVERNMENT OF THE FURNISHING OF A BID BOND AT THE TIME THE BIDS ARE OPENED WHEN IT IS IN THE PUBLIC INTEREST TO DO SO WOULD LEAD TO THE BROKERING OR SELLING OF CONTRACTS, ETC., WHEN THE BID IS SUBMITTED AND ACCEPTED, WHETHER ACCOMPANIED OR UNACCOMPANIED BY A BID BOND. THERE IS A LEGAL RESPONSIBILITY ON THE CONTRACTORS TO PERFORM IN ACCORDANCE WITH THE TERMS OF THE CONTRACT OR TO PAY THE UNITED STATES ANY DAMAGES RESULTING FROM FAILURE TO DO SO. THE FACT THAT THERE IS SUCH LEGAL LIABILITY SHOULD BE A SUFFICIENT DETERRENT TO THE SUBMISSION OF BIDS NOT IN GOOD FAITH FOR THE PERFORMANCE OF WORK OF THE MAGNITUDE OF THAT HERE INVOLVED.

SIMILAR PROTESTS BY THE DEPARTMENT OF THE ARMY WERE CONSIDERED IN DECISION OF JANUARY 21, 1935, 14 COMP. GEN. 559, CONCERNING FACTS SIMILAR TO THOSE PRESENT IN 14 COMP. GEN. 305 EXCEPT THAT THE BID CONTAINED NO EXPLANATION AS TO WHY A BID BOND WAS NOT FURNISHED. HOWEVER, SUCH BOND WAS FURNISHED TWO DAYS AFTER THE OPENING OF THE BID, AND SINCE THE RIGHT WAS RESERVED TO WAIVE INFORMALITIES IN THE PUBLIC INTEREST, IT WAS HELD THAT APPROPRIATED FUNDS COULD NOT BE CHARGED WITH AN AMOUNT IN EXCESS OF SUCH LOW BID. DURING THE COURSE OF SUCH DECISION IT WAS POINTED OUT THAT A BIDDER WHO FAILS TO ACCOMPANY HIS BID WITH A BID BOND AS REQUIRED OBTAINS THEREBY NO ABSOLUTE RIGHT TO AWARD EVEN THOUGH HIS BID BE LOW AND OTHERWISE PROPER. IN THIS CONNECTION IT WAS FURTHER STATED THAT " THE ONLY MATTER REQUIRING CONSIDERATION IS THE PUBLIC INTEREST AND WHETHER, IN VIEW THEREOF, THE TECHNICAL FAILURE TO SUBMIT BID BOND WITH BID MAY BE WAIVED AND, IN SUCH CONSIDERATION, THE DIFFERENCE IN THE AMOUNT OF THE BIDS--- THE CIRCUMSTANCES SURROUNDING THE FAILURE TO SUBMIT THE BID BOND WITH THE BID RATHER THAN A SHORT TIME THEREAFTER--- AND THE USES OF THE PUBLIC MONEYS, BECOME CONTROLLING.'

IN HOLDING THAT THE INADVERTENT FAILURE OF THE HIGH BIDDER TO FURNISH A CASH DEPOSIT IN CONNECTION WITH HIS BID TO PURCHASE AND REMOVE CERTAIN BUILDINGS SHOULD NOT PRECLUDE CONSIDERATION OF HIS BID WHEN SUCH DEPOSIT WAS MADE THE FOLLOWING DAY, IT WAS STATED IN 26 COMP. GEN. 49, THAT SUCH BOND DID NOT AFFECT, IN ANY WAY, THE AGREED PRICE OF THE WORK TO BE PERFORMED AND THAT THE BIDDER, BY ITS FAILURE TO HAVE FURNISHED SUCH BOND WITH ITS BID, WAS NOT ATTEMPTING TO, AND DID NOT, OBTAIN ANY UNDUE ADVANTAGE THEREBY TO THE DETRIMENT OF OTHER BIDDERS. ALSO, SEE 16 COMP. GEN. 493 AND 809.

AS POINTED OUT IN YOUR LETTER ALL OF SUCH DECISIONS WERE RENDERED PRIOR TO THE ENACTMENT OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, AND THE QUESTION PROPERLY ARISES AS TO WHETHER THE RULE ESTABLISHED BY SUCH DECISIONS IS MODIFIED OR ABROGATED BY SECTION 3 (B) OF SUCH ACT, 62 STAT. 23, WHICH PROVIDES AS FOLLOWS:

ALL BIDS SHALL BE PUBLICLY OPENED AT THE TIME AND PLACE STATED IN THE ADVERTISEMENT. AWARD SHALL BE MADE WITH REASONABLE PROMPTNESS BY WRITTEN NOTICE TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED: PROVIDED, THAT ALL BIDS MAY BE REJECTED WHEN THE AGENCY HEAD DETERMINES THAT IT IS IN THE PUBLIC INTEREST SO TO DO.

INTERPRETED LITERALLY SUCH PROVISION WOULD PRECLUDE FROM CONSIDERATION ALL BIDS SUBMITTED UNDER CIRCUMSTANCES CONSIDERED IN THE AFOREMENTIONED DECISIONS OF THIS OFFICE. IN ADDITION, THERE WOULD BE PRECLUDED FROM CONSIDERATION THOSE BIDS WHICH FAILED, HOWEVER SLIGHT, TO CONFORM TO THE INVITATION TO BID. FOR EXAMPLE, A BID WOULD HAVE TO BE REJECTED, THOUGH OTHERWISE PROPER, IF COPIES WERE NOT FURNISHED IN DUPLICATE; IF IT WERE UNSIGNED; IF EXECUTED IN PENCIL WHERE THE REQUIREMENT WAS FOR EXECUTION IN INK; IF CORPORATE SEAL WERE NOT FURNISHED; IF NOT ADDRESSED EXACTLY AS ILLUSTRATED IN THE INSTRUCTIONS TO BIDDERS; IF SAMPLES WERE NOT FURNISHED WHEN REQUIRED; AND FOR NUMEROUS OTHER REASONS REGARDLESS OF THE FACT THAT SUCH INFORMALITY MAY NOT IN ANY WAY AFFECT THE PRICE, QUALITY, QUANTITY, NOR PREJUDICE THE RIGHTS OF OTHER BIDDERS. NOTHING IS FOUND IN THE LEGISLATIVE HISTORY OF THE PROVISION IN QUESTION TO INDICATE THAT THE CONGRESS INTENDED SUCH RESULTS AND I HAVE NO DOUBTS BUT THAT HAD THE CONGRESS INTENDED TO EFFECT SO DRASTIC A CHANGE IN THE PRACTICES THERETOFORE FOLLOWED BY THE CONTRACTING OFFICERS AND TO OVERRULE THE LONG LINE OF DECISIONS BY THIS OFFICE, THE LEGISLATIVE HISTORY OF SUCH PROVISION WOULD CLEARLY DISCLOSE SUCH INTENT.

ACCORDINGLY, I AM OF THE VIEW THAT THE PROVISIONS OF SECTION 3 (B), SUPRA, TO THE EFFECT THAT AWARD SHALL BE MADE TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION FOR BIDS, WERE NOT INTENDED TO DEPRIVE CONTRACTING OFFICERS OF THE GOVERNMENT OF THE RIGHT TO WAIVE INFORMALITIES IN BIDS AS HAD BEEN THE PRACTICE FOR MANY YEARS PRIOR TO THE ENACTMENT OF THE ARMED SERVICES PROCUREMENT ACT OF 1947.

PERTINENT PROVISIONS OF PARAGRAPHS 2-403, 2-404 AND 10-102 OF THE ARMED SERVICES PROCUREMENT REGULATIONS ARE SET FORTH IN THE LETTER OF JULY 24 AS FOLLOWS---

2-403 REJECTION OF BIDS.--- ANY BID WHICH DOES NOT CONFORM TO THE ESSENTIAL REQUIREMENTS OF THE INVITATION FOR BIDS SHALL BE REJECTED, PROVIDED THAT ANY SUCH BID MAY BE CONSIDERED WHEN IN THE INTEREST OF THE GOVERNMENT AND NOT PREJUDICIAL TO THE OTHER BIDDERS. ALL BIDS MAY BE REJECTED BY THE CONTRACTING OFFICER (I) WHEN REJECTION IS IN THE INTEREST OF THE GOVERNMENT, * * *

3-404 MINOR INFORMALITIES OR IRREGULARITIES IN BIDS.--- THE CONTRACTING OFFICER SHALL GIVE TO THE BIDDER AN OPPORTUNITY TO CURE ANY DEFICIENCY RESULTING FROM A MINOR INFORMALITY OR IRREGULARITY IN A BID, OR IN THE ALTERNATIVE, WHEN IT IS NOT TO THE DISADVANTAGE OF THE GOVERNMENT, MAY WAIVE ANY SUCH DEFICIENCY WHEN TIME DOES NOT PERMIT THE CURING THEREOF. ILLUSTRATIVE EXAMPLES OF MINOR INFORMALITIES OR IRREGULARITIES ARE THE FOLLOWING: INADVERTENT FAILURE TO FURNISH BID BOND WITH BID; FAILURE TO AFFIX CORPORATE SEAL; FAILURE TO FURNISH REQUIRED CATALOGS, CUTS OR DESCRIPTIVE DATA. 10-102 BID BONDS.--- WHEN A SOLICITATION OF BIDS REQUIRES A BID BOND, THE REQUIREMENT SHALL NOT BE WAIVED UNLESS IT IS WAIVED EQUALLY FOR ALL BIDDERS.

INSOFAR AS THE PROVISIONS OF PARAGRAPH 2-404 PERTAIN TO THE WAIVER OF FAILURES TO FURNISH BID BONDS WHERE SUCH FAILURES ARE DUE TO INADVERTENCE, THE REGULATIONS APPEAR TO BE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3 (B) OF THE ARMED SERVICES PROCUREMENT ACT AS INTERPRETED ABOVE. HOWEVER, THE REPORT DATED JUNE 22, 1951, OF THE SUBCOMMITTEE ON PROCUREMENT OF THE COMMITTEE ON ARMED SERVICES OF THE HOUSE OF REPRESENTATIVES, REFERRED TO IN THE LETTER OF JULY 24, INDICATES THAT, IN PRACTICE, CONTRACTING OFFICERS OF THE DEPARTMENT OF THE NAVY MAY NOT BE FOLLOWING THE REGULATION AS STRICTLY AS THEY SHOULD BE. IN OTHER WORDS, SAID REPORT INDICATES THAT IT IS THE PRACTICE ON THE PART OF THE DEPARTMENT OF THE NAVY TO ASSUME THAT THE FAILURE OF A LOW BIDDER TO FURNISH A BID BOND IS DUE TO INADVERTENCE, AND, WITHOUT ANY INVESTIGATION OF THE FACTS, THE DEFICIENCY IS PERMITTED TO BE CORRECTED OR PERHAPS THE BID BOND IS WAIVED ENTIRELY. THERE CAN BE NO QUESTION BUT THAT SUCH PRACTICE COULD RESULT IN BIDDERS, WHO ARE UNABLE TO SECURE A BID BOND BECAUSE OF THEIR FINANCIAL STATUS OR FOR OTHER REASONS, HAVING THEIR BIDS CONSIDERED AND RECEIVING AWARDS ON GOVERNMENT CONTRACT. SUCH PRACTICE WOULD APPEAR TO BE NOT ONLY CONTRARY TO THE INTEREST OF THE GOVERNMENT BUT, ALSO, WOULD APPEAR TO BE PREJUDICIAL TO OTHER BIDDERS. ACCORDINGLY, THE CORRECTION OF A DEFICIENCY OF FAILING TO FURNISH A BID BOND SHOULD BE PERMITTED ONLY AFTER INVESTIGATION AND WHERE IT HAS BEEN ESTABLISHED CLEARLY THAT THE DEFICIENCY DID NOT RESULT FROM THE CONTRACTOR'S INABILITY TO OBTAIN A BID BOND BECAUSE OF ITS FINANCIAL STATUS OR SOME SIMILAR REASON BUT WAS DUE SOLELY TO OVERSIGHT OR SOME OTHER EXCUSABLE CAUSE.

FURTHERMORE, AS THE AFOREMENTIONED REPORT INDICATES, THERE APPEARS TO BE A DISCREPANCY BETWEEN THE PROVISIONS OF PARAGRAPH 2-404 PERMITTING THE WAIVER OF BID BONDS IN INDIVIDUAL CASES AND THE PROVISIONS OF PARAGRAPH 10 -102 PROVIDING THAT THE REQUIREMENT OF A BID BOND SHALL NOT BE WAIVED UNLESS IT IS WAIVED FOR ALL BIDDERS.

WITH RESPECT TO THE PROTEST BY T. F. SCHOLES, INC., CONCERNING THE REFUSAL OF THE DEPARTMENT OF THE NAVY TO ACCEPT ITS BID IN CONNECTION WITH THE EXTENSION AND REPAIR TO THE RAILROAD SYSTEM AT THE NAVAL AMMUNITION DEPOT, EARLE, NEW JERSEY, THE RECORD DISCLOSES THAT BIDS FOR SUCH PROJECT WERE OPENED ON JUNE 21, 1951, AND THAT THE BID SUBMITTED BY T. F. SCHOLES, INC., IN THE AMOUNT OF $1,540,355 WAS THE LOWEST OF FIVE BIDS SUBMITTED AND IS APPROXIMATELY $148,000 LESS THAN THE NEXT LOWEST BID. HOWEVER, SUCH BID WAS NOT ACCOMPANIED BY A BID BOND AS REQUIRED BY THE INVITATION TO BID AND, CONSIDERING THE REASON FOR THE FAILURE TO FURNISH SUCH BOND, YOU STATE THAT THE DEPARTMENT PROPOSES TO AWARD THE CONTRACT TO THE NEXT LOWEST BIDDER. THE RECORD FURTHER SHOWS THAT, WHILE THE BID OF T. F. SHOLES, INC., WAS NOT ACCOMPANIED BY A BID BOND, THERE WAS ATTACHED TO SUCH BID A MEMORANDUM TO THE EFFECT THAT THE NECESSARY BID BOND HAD NOT AT THAT TIME BEEN RECEIVED IN THE OFFICE OF T. F. SCHOLES, INC., BUT THAT IT WAS UNDERSTOOD THAT IT WAS IN THE MAILS FROM READING, PENNSYLVANIA, TO THE AGENT OF THE SCHOLES COMPANY FOR DELIVERY WITH THE BID. HOWEVER, IT WAS NOT UNTIL JUNE 27, 1951, OR SIX DAYS FROM THE OPENING OF SUCH BIDS THAT T. F. SCHOLES, INC., WAS ABLE TO PROCURE AND TENDER THE REQUIRED BOND IN THE PRESCRIBED FORM.

IT IS STATED IN YOUR LETTER THAT IN ORDER THAT THE CONTRACTING OFFICER MIGHT DETERMINE WHETHER THE FAILURE OF THE SCHOLES COMPANY TO FURNISH A BID BOND WITH ITS BID WAS INADVERTENT AND THEREFORE AN INFORMALITY OR IRREGULARITY WHICH MIGHT BE WAIVED UNDER THE PROVISIONS OF PARAGRAPH 2-404 OF THE ARMED SERVICES PROCUREMENT REGULATION, THE SCHOLES COMPANY WAS REQUESTED TO SUBMIT A STATEMENT OF THE FACTS REGARDING SUCH FAILURE.

SUCH STATEMENT EXPLAINS THAT THE SCHOLES COMPANY AT FIRST ATTEMPTED TO BID THE WORK WITH ANOTHER BIDDER ACTING AS PRIME CONTRACTOR AND SCHOLES COMPANY WOULD GIVE SUCH BIDDER A SUBCONTRACT QUOTATION FOR THE RAILROAD TRACK WORK INVOLVED. HOWEVER SUCH ARRANGEMENT COULD NOT BE COMPLETED AND SHORTLY BEFORE BIDS WERE TO BE SUBMITTED THE SCHOLES COMPANY DECIDED TO BID ALONE ON THE ENTIRE PROJECT. THE MEMORANDUM ATTACHED TO THE BID SUBMITTED BY THE SCHOLES COMPANY IS EXPLAINED IN THE FOLLOWING PARAGRAPH OF SUCH STATEMENT:

ACCORDINGLY, JOHN W. HOMER, JR., SECRETARY OF ESSICK AND BARR, INC., OF READING, PENNSYLVANIA, WAS CONTACTED. MR. HOMER PERSONALLY HANDLES ALL OF OUR INSURANCE, INCLUDING OUR BONDING. OF LATE HE HAS BEEN PLACING OUR BONDS WITH UNITED STATES FIDELITY AND GUARANTY COMPANY THROUGH KURTZ AND DOWD, INC., OF READING, PENNSYLVANIA. HE HAD PREVIOUSLY RECEIVED ADVICE FROM THEM THAT THEY WOULD WRITE BOND FOR US WITHOUT QUESTION ON WORK UP TO $750,000.00. HE KNEW THAT THEY WOULD WRITE THE BOND FOR THE SUBJECT WORK IF HE COULD SECURE SUFFICIENT RE-INSURANCE TO TAKE CARE OF THE GAP BETWEEN $750,000.00 AND OUR BID OF $1,540,355.00. HE THEREFORE ENDEAVORED TO SECURE THE NECESSARY RE-INSURANCE; ON THURSDAY MORNING, JUNE 21, 1951, HE HAD NOT AS YET BEEN ABLE TO OBTAIN THE NECESSARY RE-INSURANCE BUT FELT THAT HE COULD OBTAIN SAME PRIOR TO TIME SET FOR THE OPENING OF THE BIDS AND FORWARDED THE BID BOND BY MESSENGER TO THE WRITER AT NEW YORK WITH INSTRUCTIONS THAT THE MESSENGER SHOULD CONTACT HIM BEFORE SUBMITTING SAME, RELATIVE TO INSTRUCTIONS ON THE RE-INSURANCE AND SECURAL OF NECESSARY COUNTERSIGNATURES IN NEW YORK. IN THAT THE WRITER WAS UNABLE TO CONTACT MR. HOMER HIMSELF, AND RECEIVED ADVICE THAT THE BID BOND WAS ON THE WAY TO NEW YORK, STATEMENT ACCOMPANYING OUR BID WAS PREPARED. IT DEVELOPED THAT WHEN THE MESSENGER ARRIVED AT NEW YORK, MR. HOMER WAS UNABLE TO SECURE NECESSARY RE-INSURANCE.

CONSEQUENTLY, WHILE THE BID BOND HAD LEFT READING, PENNSYLVANIA, AS STATED IN THE MEMORANDUM ATTACHED TO THE BID, THE EXECUTION OF SUCH BOND WAS CONTINGENT UPON THE SECURING OF REINSURANCE, WHICH THE SCHOLES COMPANY WAS UNABLE TO OBTAIN. IT FURTHER APPEARS THAT ON JUNE 23, 1951, TWO DAYS AFTER THE BIDS WERE OPENED, THE SCHOLES COMPANY WAS UNABLE TO FURNISH THE REQUIRED BOND BUT, INSTEAD, TENDERED TO THE CONTRACTING OFFICER A BOND WITH A PROVISION MAKING THE BOND CONTINGENT UPON THE OBTAINING OF A REGULATION "V" LOAN.

SUBSEQUENTLY, AS NOTED ABOVE, ON JUNE 27 A BOND IN THE FORM PRESCRIBED WAS TENDERED THE CONTRACTING OFFICER. IN EXPLAINING SUCH DELAY THE SCHOLES COMPANY STATES THAT "ANY DELAY IN OUR SUBMITTING THE BID BOND IN QUESTION WAS DUE DIRECTLY TO THE FACT THAT WE ARE AT THE PRESENT TIME OCCUPIED WITH A NUMBER OF GOVERNMENT PROJECTS THAT HAD EXTENDED OUR BONDING CAPACITY, WHICH REQUIRED ADDITIONAL FINANCING ARRANGEMENTS THAT COULD NOT POSSIBLY HAVE BEEN COMPLETED DURING THE WEEKEND ( SATURDAY AND SUNDAY), THAT FOLLOWED THE OPENING OF THIS BID.'

IN VIEW OF THE FOREGOING CIRCUMSTANCES IT CLEARLY APPEARS THAT THE FAILURE OF THE SCHOLES COMPANY TO FURNISH A BID BOND WITH ITS BID WAS NOT DUE TO INADVERTENCE OR OVERSIGHT, BUT RATHER, WAS DUE TO ITS FINANCIAL INABILITY TO QUALIFY FOR THE NECESSARY BOND BEFORE THE BIDS WERE OPENED. CF. 16 COMP. GEN. 493.

WHILE TO PERMIT AN OTHERWISE QUALIFIED BIDDER TO FURNISH A BID BOND INADVERTENTLY OMITTED FROM ITS BID WOULD NOT BE PREJUDICIAL TO OTHER BIDDERS, IT APPEARS THAT, WHERE AS HERE, A BIDDER FAILED TO FURNISH SUCH BOND BECAUSE HE COULD NOT FINANCIALLY QUALIFY FOR A BOND UNTIL AFTER THE BIDS WERE OPENED, THE ACCEPTANCE OF A BOND SECURED THEREAFTER WOULD UNDER SUCH CIRCUMSTANCES, GIVE TO THAT BIDDER AN ADVANTAGE NOT ACCORDED OTHER BIDDERS OR PROSPECTIVE BIDDERS.

WHILE IT IS PROPOSED IN YOUR LETTER TO REJECT THE LOW BID FOR THE REASON THAT THE FAILURE TO FURNISH A BID BOND WITH THE BOND WAS NOT INADVERTENT, IT IS TO BE NOTED THAT ACTION WAS NOT TAKEN PROMPTLY BY THE DEPARTMENT OF THE NAVY TO REJECT THE SAID LOW BID UPON BEING ADVISED OF THE REASONS WHY A BID BOND WAS NOT FURNISHED WITH THE BID, OR PROMPTLY THEREAFTER. OTHER WORDS, THE RECORD INDICATES THAT, ON JUNE 22--- THE DAY AFTER BIDS WERE OPENED--- THE DEPARTMENT OF THE NAVY WAS APPRISED BY THE CONTRACTOR OF THE REASONS FOR ITS FAILURE TO HAVE FURNISHED A BID BOND BUT NO ACTION WAS TAKEN BY THE DEPARTMENT OF THE NAVY TO REJECT THE LOW BID UNTIL JUNE 28, OR AFTER THE CONTRACTOR HAD, IN FACT, SUPPLIED A BID BOND ON JUNE 27. CONSIDERING THE FACT THAT SUCH DELAY BY THE NAVY APPARENTLY WAS IN LINE WITH THE PRACTICE OBTAINING BY CONTRACTING OFFICERS AS INDICATED IN THE REPORT OF THE HOUSE SUBCOMMITTEE REFERRED TO ABOVE, THAT IS, TO PERMIT OTHERWISE LOW BIDDERS TO SUBMIT BID BONDS AFTER OPENING REGARDLESS OF THE REASONS FOR THEIR INABILITY TO HAVE FURNISHED ONE WITH THE BID, AND THE FACT THAT THE LOW BID HERE IS SOME $148,000 LESS THAN THAT OF THE NEXT LOW BIDDER, IT IS RECOMMENDED THAT ALL BIDS BE REJECTED AND THE PROJECT READVERTISED. IN CONNECTION WITH SUCH RECOMMENDATION, WHILE I AM AWARE OF THE FACT THAT THE LETTER OF JULY 24 INDICATES THAT IT IS NECESSARY TO PROCEED WITH THE PROJECT AS SOON AS POSSIBLE, CONSIDERING THE FACT THAT A FURTHER DELAY OF 10 DAYS OR SO MAY NOT BE MATERIAL, AND CONSIDERING THE CIRCUMSTANCES HERE INVOLVED, I FEEL THAT THE INTERESTS OF THE GOVERNMENT WOULD BE BEST SERVED BY THE REJECTION OF ALL BIDS AND ADVERTISING FOR NEW BIDS. CERTAINLY THERE SHOULD BE COMPELLING REASONS FOR DOING OTHERWISE.