B-142614, JUL. 18, 1960

B-142614: Jul 18, 1960

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WAS FORWARDED FOR OUR COMMENTS BY LETTER OF APRIL 13. SECTION 102-2 (A) PROVIDES THAT WHENEVER A BID GUARANTEE IS DEEMED NECESSARY. IT IS OUR UNDERSTANDING THAT THE ELIMINATION OF THE LIMITATION WOULD NOT HAVE ANY APPRECIABLE EFFECT ON THE COST OF A BID BOND AND. SECTION 102-3 (A) (2) PROVIDES THAT WHERE A BID GUARANTEE IS DETERMINED TO BE NECESSARY. WE SUGGEST THAT THE PROVISION TO BE INCLUDED IN THE INVITATION FOR BIDS BE AMENDED TO READ SUBSTANTIALLY AS FOLLOWS: "FAILURE TO FURNISH A REQUIRED BID GUARANTEE * * * WILL RESULT IN REJECTION OF THE BID EXCEPT AS PROVIDED IN FEDERAL PROCUREMENT REGULATIONS. WE INFER FROM THE LANGUAGE OF SECTION 1-10.102-3 (B) THAT ACTION WILL BE TAKEN PROMPTLY UPON PROMULGATION OF THE REGULATION TO INSURE THAT ALL COPIES OF STANDARD FORM 22 USED IN APPLICABLE PROCUREMENT ACTIONS WILL CONTAIN THE PROVISION SET OUT IN SECTION 1-10.102-3 (A) (2).

B-142614, JUL. 18, 1960

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

A PROPOSED ADDITION TO THE FEDERAL PROCUREMENT REGULATIONS AS PART 1-10, BONDS AND INSURANCE, WAS FORWARDED FOR OUR COMMENTS BY LETTER OF APRIL 13, 1960, FROM THE ASSISTANT COMMISSIONER FOR PROCUREMENT POLICY.

SECTION 102-2 (A) PROVIDES THAT WHENEVER A BID GUARANTEE IS DEEMED NECESSARY, THE AMOUNT OF THE GUARANTEE SHALL BE NOT LESS THAN 20 PERCENT OF THE BID PRICE NOR MORE THAN $3,000,000. AS NOTED IN OUR COMMENTS WITH RESPECT TO AN EARLIER PROPOSED REGULATION, B-138178, FEBRUARY 27, 1959, WE BELIEVE THAT THE PROVISION SHOULD BE AMENDED TO REQUIRE THAT THE GUARANTEE BE NOT LESS THAN 20 PERCENT OF THE BID PRICE WITHOUT MAXIMUM LIMITATION. IT IS OUR UNDERSTANDING THAT THE ELIMINATION OF THE LIMITATION WOULD NOT HAVE ANY APPRECIABLE EFFECT ON THE COST OF A BID BOND AND, PRESUMABLY, WOULD NOT CAUSE ANY SUBSTANTIAL INCREASE IN THE BID PRICE. ELIMINATION OF THE LIMITATION COULD, HOWEVER, INCREASE SIGNIFICANTLY THE PROTECTION AFFORDED THE UNITED STATES IN LARGE CONSTRUCTION PROJECTS.

SECTION 102-3 (A) (2) PROVIDES THAT WHERE A BID GUARANTEE IS DETERMINED TO BE NECESSARY, THE INVITATION FOR BIDS SHALL CONTAIN A PROVISION STATING THAT "FAILURE TO FURNISH A REQUIRED BID GUARANTEE IN THE PROPER AMOUNT, BY THE TIME SET FOR OPENING OF BIDS, MAY BE CAUSE FOR REJECTION OF THE BID.' HOWEVER, SECTION 102-4 REQUIRES REJECTION OF THE BID FOR FAILURE TO SUBMIT A PROPER OR TIMELY BID GUARANTEE EXCEPT UNDER THREE NARROWLY DEFINED CIRCUMSTANCES. TO AVOID AN AMBIGUITY WHICH COULD BE MISLEADING TO BIDDERS, AND IN VIEW OF 38 COMP. GEN. 532, WE SUGGEST THAT THE PROVISION TO BE INCLUDED IN THE INVITATION FOR BIDS BE AMENDED TO READ SUBSTANTIALLY AS FOLLOWS: "FAILURE TO FURNISH A REQUIRED BID GUARANTEE * * * WILL RESULT IN REJECTION OF THE BID EXCEPT AS PROVIDED IN FEDERAL PROCUREMENT REGULATIONS, SECTION 1-10.102-4.' THIS COMMENT SUBSTANTIALLY REPEATS THE VIEW PRESENTED IN OUR LETTER OF FEBRUARY 27, 1959. WE ALSO RECOMMEND WITH RESPECT TO THE PROVISION THAT THE FIRST SENTENCE OF THE SECOND PARAGRAPH, WHICH LISTS ACCEPTABLE FORMS OF BID GUARANTEE, BE AMENDED BY INCLUDING THEREIN LETTERS OF CREDIT, AT LEAST WITH RESPECT TO OVERSEAS BIDDERS. SEE B-141907, FEBRUARY 17, 1960.

WE INFER FROM THE LANGUAGE OF SECTION 1-10.102-3 (B) THAT ACTION WILL BE TAKEN PROMPTLY UPON PROMULGATION OF THE REGULATION TO INSURE THAT ALL COPIES OF STANDARD FORM 22 USED IN APPLICABLE PROCUREMENT ACTIONS WILL CONTAIN THE PROVISION SET OUT IN SECTION 1-10.102-3 (A) (2).

SECTION 1-10.102-4 SETS OUT EXCEPTIONS TO THE RULE THAT NONCOMPLIANCE WITH THE BID GUARANTEE REQUIREMENT WILL RESULT IN REJECTION OF THE BID. THE FIRST APPLIES WHERE ONLY A SINGLE BID IS RECEIVED. WE HAVE ALREADY RECOGNIZED THAT EXCEPTION TO THE GENERAL RULE. B-142869, MAY 27, 1960. THE THIRD EXCEPTION ALSO APPEARS APPROPRIATE. YOU MAY WISH TO CONSIDER INCLUDING AN ADDITIONAL EXCEPTION TO PERMIT ADJUSTMENT OF THE AMOUNT OF BID SECURITY AFTER OPENING WHERE THE DEFICIENCY IN THE SECURITY RESULTED FROM AN ERROR IN BID, WHICH ERROR MAY BE CORRECTED UNDER THE RULES ESTABLISHED THEREFOR. 39 COMP. GEN. 209.

WITH RESPECT TO EXCEPTION (B), IT IS OUR VIEW THAT WHERE, AS IN THE VAST MAJORITY OF CASES, THE REQUIREMENT FOR BID SECURITY IS IMPOSED ONLY BY REGULATION, THE TERMS OF ITS APPLICABILITY AND THE EXCEPTIONS WHICH WILL BE PERMITTED ARE ALSO MATTERS TO BE ESTABLISHED BY REGULATIONS. THEREFORE SEE NO LEGAL OBJECTION TO EXCEPTION (B) SO LONG AS BIDDERS ARE MADE AWARE OF ITS APPLICABILITY.

SECTION 102-5 PROVIDES THAT THE ENTIRE SUBPART 1-10.1 IS APPLICABLE BOTH TO NEGOTIATED AND FORMALLY ADVERTISED PROCUREMENTS, AND PROVIDES FOR SUBSTITUTION OF COMPARABLE TERMINOLOGY WHENEVER APPROPRIATE. WE BELIEVE THAT AS A MATTER OF ORDERLY SEQUENCE THE PROVISIONS OF THIS SECTION WOULD BE MORE MEANINGFUL TO THE READER IF LOCATED NEAR THE BEGINNING OF THE SUBPART.