B-148170, MARCH 8, 1962, 41 COMP. GEN. 585

B-148170: Mar 8, 1962

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IS A BID BOND WHICH DID NOT LIMIT THE GOVERNMENT'S RIGHT TO INDEMNIFICATION AND. THE TECHNICAL DEFICIENCY IN THE BID BOND IS NOT A DEFICIENCY WHICH MAKES THE BID BOND NONRESPONSIVE TO THE INVITATION AND THE LOW BID MAY BE CONSIDERED FOR AWARD. REQUESTS OUR DECISION AS TO WHETHER OR NOT YOU ARE REQUIRED TO REJECT AS BEING NONRESPONSIVE THE BID OF MONTGOMERY ELEVATOR COMPANY. THE IFB WAS ON STANDARD FORM 20. PART OF THE TERMS OF WHICH WERE: THE UNDERSIGNED AGREES THAT. UPON RECEIPT OF WRITTEN NOTICE THAT A PRELIMINARY EXAMINATION OF THE BIDS INDICATES THAT HE WILL BE THE SUCCESSFUL BIDDER. HE WILL WITHIN 10 DAYS (UNLESS A LONGER PERIOD IS ALLOWED) AFTER RECEIPT OF THE PRESCRIBED FORMS. THAT CONTRACT AND BOND FORMS FURNISHED BY THE BIDDER PRIOR TO AWARD OF CONTRACT WILL BECOME EFFECTIVE ONLY IF HIS BID ACTUALLY IS ACCEPTED WITHIN SAID 60 DAYS AFTER THE DATE OF OPENING OF THE BIDS (OR WITHIN SUCH SHORTER PERIOD AS MAY BE SPECIFIED IN THE BID BY THE BIDDER). ( ITALICS SUPPLIED.).

B-148170, MARCH 8, 1962, 41 COMP. GEN. 585

BONDS - BID - FORM VARIANCES A BID BOND ACCOMPANYING A LOW BID FOR A CONSTRUCTION PROJECT SUBMITTED ON A COMMERCIAL FORM WHICH DIFFERED FROM THE STANDARD GOVERNMENT FORM IN THAT IT DID NOT CONTAIN ANY FORFEITURE PROVISION IN CASE THE BIDDER FAILED TO GIVE A PERFORMANCE BOND, BUT WHICH DID CONTAIN A PROVISION TO INDEMNIFY THE GOVERNMENT AGAINST THE BIDDER'S FAILURE TO ENTER INTO A CONTRACT IN ACCORDANCE WITH ITS BID, IS A BID BOND WHICH DID NOT LIMIT THE GOVERNMENT'S RIGHT TO INDEMNIFICATION AND, THEREFORE, THE TECHNICAL DEFICIENCY IN THE BID BOND IS NOT A DEFICIENCY WHICH MAKES THE BID BOND NONRESPONSIVE TO THE INVITATION AND THE LOW BID MAY BE CONSIDERED FOR AWARD.

TO GRANT BLOODGOOD, UNITED STATES DEPARTMENT OF THE INTERIOR, MARCH 8, 1962:

YOUR LETTER OF FEBRUARY 8, 1962, REQUESTS OUR DECISION AS TO WHETHER OR NOT YOU ARE REQUIRED TO REJECT AS BEING NONRESPONSIVE THE BID OF MONTGOMERY ELEVATOR COMPANY, HEREINAFTER REFERRED TO AS MONTGOMERY, OFFERED IN RESPONSE TO INVITATION FOR BIDS ( IFB) ON SPECIFICATIONS NO. DC -5717 FOR THE FURNISHING AND INSTALLING OF ONE PASSENGER ELEVATOR FOR THE FLAMING GORGE DAM, DAGGETT COUNTY, UTAH.

THE IFB WAS ON STANDARD FORM 20, THE TERMS OF WHICH REQUIRED THE BIDDER TO FURNISH A GUARANTEE IN THE FORM OF A BID BOND OF AT LEAST 20 PERCENT OF THE AMOUNT OF THE BID, AND THE SUCCESSFUL BIDDER TO FURNISH PERFORMANCE AND PAYMENT BONDS. THE INSTRUCTIONS TO THE IFB INFORMED BIDDERS THAT IN CASE OF A WITHDRAWAL OF THEIR BID, OR OF FAILURE UPON AWARD TO ENTER INTO A CONTRACT AND OF THEIR FAILURE, IF REQUIRED, TO GIVE PERFORMANCE AND PAYMENT BONDS, THEIR BID GUARANTEE WOULD BE AVAILABLE TO OFFSET THE DIFFERENCE BY WHICH THE COST OF PROCURING THE WORK ELSEWHERE EXCEEDED THE AMOUNT OF THEIR BID.

MONTGOMERY OFFERED ITS BID ON A SIGNED STANDARD FORM 21, PART OF THE TERMS OF WHICH WERE:

THE UNDERSIGNED AGREES THAT, UPON RECEIPT OF WRITTEN NOTICE THAT A PRELIMINARY EXAMINATION OF THE BIDS INDICATES THAT HE WILL BE THE SUCCESSFUL BIDDER, OR UPON WRITTEN NOTICE OF THE ACCEPTANCE OF THIS BID MAILED, OR OTHERWISE FURNISHED, WITHIN 60 DAYS AFTER THE DATE OF OPENING OF THE BIDS (IF NO SHORTER PERIOD BE SPECIFIED), WHICHEVER OF THESE EVENTS OCCURS FIRST, HE WILL WITHIN 10 DAYS (UNLESS A LONGER PERIOD IS ALLOWED) AFTER RECEIPT OF THE PRESCRIBED FORMS, EXECUTE STANDARD FORM 23, CONSTRUCTION CONTRACT, AND GIVE PERFORMANCE BOND AND PAYMENT BOND ON GOVERNMENT STANDARD FORMS, WITH GOOD AND SUFFICIENT SURETY OR SURETIES: PROVIDED, THAT CONTRACT AND BOND FORMS FURNISHED BY THE BIDDER PRIOR TO AWARD OF CONTRACT WILL BECOME EFFECTIVE ONLY IF HIS BID ACTUALLY IS ACCEPTED WITHIN SAID 60 DAYS AFTER THE DATE OF OPENING OF THE BIDS (OR WITHIN SUCH SHORTER PERIOD AS MAY BE SPECIFIED IN THE BID BY THE BIDDER). ( ITALICS SUPPLIED.)

THE GUARANTEE SUBMITTED WITH MONTGOMERY'S BID WAS A COMMERCIAL BOND OF THE FEDERAL INSURANCE COMPANY IN THE AMOUNT OF 20 PERCENT OF ITS BID PRICE. THE BOND WAS PRINTED ON A COMPANY FORM WHICH DIFFERED FROM THE STANDARD FORM PROVIDED BY THE GOVERNMENT IN THAT IT DID NOT SPECIFICALLY PROVIDE FOR ANY FORFEITURE OF THE GUARANTEE IN CASE THE PRINCIPAL FAILED TO GIVE A PAYMENT BOND WITH GOOD AND SUFFICIENT SURETY. THE PERTINENT LANGUAGE IN THIS COMMERCIAL BOND WAS:

NOW, THEREFORE, IF THE OBLIGEE SHALL ACCEPT THE BID OF THE PRINCIPAL AND THE PRINCIPAL SHALL ENTER INTO A CONTRACT WITH THE OBLIGEE IN ACCORDANCE WITH SUCH BID AND GIVE BOND WITH GOOD AND SUFFICIENT SURETY FOR THE FAITHFUL PERFORMANCE OF SUCH CONTRACT, * * * THEN THIS OBLIGATION SHALL BE NULL AND VOID, OTHERWISE TO REMAIN IN FULL FORCE AND EFFECT. ( ITALICS SUPPLIED.)

FINALLY, THE RECITAL OF THE COMMERCIAL BOND IDENTIFIES THE BID AS BEING SECURED ON JANUARY 12, 1962, ALTHOUGH THE BOND'S DATE OF EXECUTION IS SHOWN AS DECEMBER 28, 1961. INSTRUCTION NO. 7 ON THE BACK OF THE STANDARD GOVERNMENT FORM FOR BID BONDS STATES THAT THE DATE OF THE BOND MUST NOT BE PRIOR TO THE DATE OF THE INSTRUMENT IN CONNECTION WITH WHICH IT IS GIVEN.

UPON DISCOVERY OF THESE ERRORS AFTER BID OPENING, MONTGOMERY SUBMITTED A BOND ON THE PROPER GOVERNMENT FORM, STANDARD FORM 24. YOU ASK IF THE BID BOND ORIGINALLY OFFERED BY MONTGOMERY IS RESPONSIVE TO THE IFB AND, IF NOT, WHETHER THE LATER BID BOND ON THE GOVERNMENT FORM REMEDIED THE DEFICIENCY.

FIRST, WE SHOULD POINT OUT THAT THE FAILURE TO UTILIZE A DESIGNATED BOND FORM IS NOT IN ITSELF A SUFFICIENT BASIS TO REJECT AN OTHERWISE ACCEPTABLE BID. SEE 39 COMP. GEN. 83, 84. MOREOVER, WE HELD IN 39 COMP. GEN. 60 THAT A COMMERCIAL BID BOND WHICH SHOWS THE DATE OF EXECUTION AS BEING PRIOR IN TIME TO THE DATE OF THE BID, BUT WHICH IS IDENTIFIABLE TO THE ONLY INVITATION OUTSTANDING FOR THE PARTICULAR PROCUREMENT, CONTAINS A TECHNICAL DEFICIENCY WHICH DOES NOT MAKE THE BID NONRESPONSIVE TO THE INVITATION. THE RATIONALE OF 39 COMP. GEN. 60 WAS THAT NOTWITHSTANDING SUCH DEFICIENCY IN EXECUTION, THE GOVERNMENT COULD ENFORCE THE BOND AGAINST THE SURETY IF THE CONTRACTOR FAILED TO GO FORWARD WITH FAITHFUL PERFORMANCE OF THE CONTRACT. WE BELIEVE THAT THIS RATIONALE WOULD BE EQUALLY APPLICABLE TO THE INSTANT CASE.

UNDER THE TERMS OF THE COMMERCIAL BOND FORM, QUOTED ABOVE, FEDERAL INSURANCE COMPANY PROPOSED TO INDEMNIFY THE GOVERNMENT AGAINST MONTGOMERY'S FAILURE TO ENTER INTO A CONTRACT WHICH WAS IN ACCORDANCE WITH ITS BID. MONTGOMERY SUBMITTED ITS BID ON, AND AFFIXED ITS SIGNATURE TO STANDARD FORM 21, THEREBY AGREEING TO "GIVE PERFORMANCE BOND AND PAYMENT BOND ON GOVERNMENT STANDARD FORMS" UPON WRITTEN NOTICE THAT A PRELIMINARY EXAMINATION OF THE BIDS INDICATED THAT IT WOULD BE THE SUCCESSFUL BIDDER OR UPON WRITTEN NOTICE OF THE ACCEPTANCE OF ITS BID. MONTGOMERY'S FAILURE UNDER SUCH CIRCUMSTANCES TO EXECUTE EITHER OF THESE BONDS WOULD CONSTITUTE A REFUSAL TO ENTER INTO A CONTRACT WHICH WAS IN ACCORDANCE WITH ITS BID. IT FOLLOWS THAT THE FEDERAL INSURANCE COMPANY WOULD BE LIABLE IN SUCH EVENT, NOTWITHSTANDING THE ABSENCE OF A SPECIFIC PROVISION IN ITS BID BOND, OR OF KNOWLEDGE OF SUCH PROVISION IN MONTGOMERY'S BID, WHICH REQUIRED MONTGOMERY TO OFFER A PAYMENT BOND. SEE BOLIVAR REORGANIZED SCHOOL DISTRICT. V. AMERICAN SURETY CO., 307 SW.2D 405, 409 ( MO. SUP. CT. 1957). THEREFORE, THE ABSENCE OF SUCH PROVISION APPEARS TO BE A TECHNICAL DEFICIENCY WHICH WOULD NOT LIMIT THE GOVERNMENT'S RIGHT TO INDEMNIFICATION.

ACCORDINGLY, THE BID BOND ORIGINALLY OFFERED BY MONTGOMERY MAY BE REGARDED AS RESPONSIVE TO THE IFB, AND MONTGOMERY'S BID, IF OTHERWISE ACCEPTABLE, MAY BE CONSIDERED FOR AWARD.