B-148342, MAR. 29, 1962

B-148342: Mar 29, 1962

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TO THE OIL AND GAS SUPPLY COMPANY: REFERENCE IS MADE TO YOUR TELEGRAM OF MARCH 6. THE BID GUARANTEE SUBMITTED WITH THE BID WAS A CASHIER'S CHECK IN THE AMOUNT OF $1. THE DECISIONS OF OUR OFFICE HAVE HELD THAT THE BID BOND REQUIREMENT MUST BE CONSIDERED A MATERIAL PART OF THE INVITATION AND THAT THE CONTRACTING OFFICER CANNOT WAIVE THE FAILURE TO COMPLY WITH THE REQUIREMENT BUT MUST REJECT AS NONRESPONSIVE A BID NOT ACCOMPANIED BY THE REQUIRED BOND. THE ARMED SERVICES PROCUREMENT REGULATION IN SECTIONS 2- 404.2 (H) AND 10-102.5 NOW PROVIDES AS A GENERAL RULE THAT THE FAILURE TO SUBMIT A PROPER BID GUARANTEE WILL REQUIRE REJECTION OF THE BID. WE CONSIDERED A CASE IN WHICH THE BOND REQUIREMENT WAS STATED SUBSTANTIALLY THE SAME AS IN PARAGRAPHS 8 AND 9 OF THE IMMEDIATE INVITATION.

B-148342, MAR. 29, 1962

TO THE OIL AND GAS SUPPLY COMPANY:

REFERENCE IS MADE TO YOUR TELEGRAM OF MARCH 6, 1962, YOUR CONFIRMING LETTER OF THE SAME DATE AND LETTER OF MARCH 23, 1962, PROTESTING THE AWARD OF A CONTRACT TO ANOTHER BIDDER UNDER INVITATION FOR BIDS ENG-95-507-62-32 ISSUED BY THE U.S. ARMY ENGINEER DISTRICT OFFICE, ANCHORAGE, ALASKA.

PARAGRAPH 8 OF THE INVITATION FOR BIDS STATES THAT THERE "SHALL BE FURNISHED WITH EACH BID IN EXCESS OF $2,000" A BID BOND OR OTHER GUARANTEE IN THE AMOUNT OF 20 PERCENT OF THE BID PRICE. ALTHOUGH YOUR COMPANY SUBMITTED A BID FOR WELL OVER $700,000, THE BID GUARANTEE SUBMITTED WITH THE BID WAS A CASHIER'S CHECK IN THE AMOUNT OF $1,000. IN A LETTER WHICH ACCOMPANIED THE BID, YOUR COMPANY STATED, IN EFFECT,THAT IN ALL ITS BUSINESS EXPERIENCE IT HAD NEVER BEFORE BEEN REQUIRED TO FURNISH A BID GUARANTEE; THAT AS A RESULT IT ASSUMED THAT A BID BOND WOULD BE ISSUED SUMMARILY BY A SURETY UPON APPLICATION BEING MADE JUST PRIOR TO THE SUBMISSION OF THE BID TO THE GOVERNMENT; AND THAT IT LEARNED TOO LATE THAT A BOND COULD NOT BE OBTAINED ON SUCH SHORT NOTICE.

APPARENTLY RELYING ON THE STATEMENT IN PARAGRAPH 9 OF THE INVITATION FOR BIDS 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," YOU SUGGEST THAT THE FAILURE TO FURNISH A GUARANTEE IN THE REQUIRED AMOUNT SHOULD BE WAIVED AS AN INFORMALITY.

BEGINNING WITH 38 COMP. GEN. 532, DATED FEBRUARY 5, 1959, THE DECISIONS OF OUR OFFICE HAVE HELD THAT THE BID BOND REQUIREMENT MUST BE CONSIDERED A MATERIAL PART OF THE INVITATION AND THAT THE CONTRACTING OFFICER CANNOT WAIVE THE FAILURE TO COMPLY WITH THE REQUIREMENT BUT MUST REJECT AS NONRESPONSIVE A BID NOT ACCOMPANIED BY THE REQUIRED BOND. IN THE CITED DECISION WE ADVISED THE HEADS OF THE DEPARTMENTS AND INDEPENDENT ESTABLISHMENTS, AGENCIES, AND OTHERS, THAT IN CASE OF AN INVITATION ISSUED MORE THAN 60 DAYS AFTER FEBRUARY 5, 1959, THE DATE OF THE DECISION, NONCOMPLIANCE WITH A REQUIREMENT IN THE INVITATION THAT BID SECURITY BE SUBMITTED WITH THE BID WOULD BE HELD TO REQUIRE REJECTION OF THE BID AS NONRESPONSIVE. THE ARMED SERVICES PROCUREMENT REGULATION IN SECTIONS 2- 404.2 (H) AND 10-102.5 NOW PROVIDES AS A GENERAL RULE THAT THE FAILURE TO SUBMIT A PROPER BID GUARANTEE WILL REQUIRE REJECTION OF THE BID. STATED THE BASIS FOR THE RULE ESTABLISHED BY THE DECISION OF FEBRUARY 5, 1959, TO BE THAT FAILURE TO ADHERE TO SUCH A RULE TENDED TO COMPROMISE THE INTEGRITY OF THE COMPETITIVE BID SYSTEM BY (1) IN EFFECT GIVING THE BIDDER AN OPTION AFTER OPENING TO DECIDE WHETHER TO MAKE HIS BID RESPONSIVE, (2) DELAYING PROCUREMENTS BY THE NEED TO INVESTIGATE THE CAUSES OF FAILURE TO COMPLY WITH A BID BOND REQUIREMENT BEFORE AWARD COULD BE MADE, AND (3) CREATING THE POSSIBILITY OF INCONSISTENT TREATMENT OF BIDDERS BECAUSE OF THE NECESSARILY SUBJECTIVE DETERMINATIONS REQUIRED OF CONTRACTING OFFICERS.

IN A SUBSEQUENT DECISION DATED JUNE 10, 1960, 39 COMP. GEN. 827, WE CONSIDERED A CASE IN WHICH THE BOND REQUIREMENT WAS STATED SUBSTANTIALLY THE SAME AS IN PARAGRAPHS 8 AND 9 OF THE IMMEDIATE INVITATION, INCLUDING A STATEMENT SIMILAR TO THAT IN PARAGRAPH 9 THAT THE FAILURE TO SUBMIT THE REQUIRED BID SECURITY "MAY" BE CAUSE FOR REJECTION. NOTWITHSTANDING THE INCLUSION OF SUCH A PROVISION IN THE INVITATION, IT WAS DETERMINED IN THAT DECISION THAT A BIDDER WHO SUBMITTED WITH ITS BID A BOND FOR LESS THAN 20 PERCENT OF THE BID PRICE AS PROVIDED FOR IN THE INVITATION SHOULD HAVE ITS BID DISREGARDED FOR FAILING TO MEET THE BID BOND REQUIREMENT. IN ARRIVING AT THIS RESULT, ATTENTION WAS DIRECTED TO ANOTHER DECISION B-140624, NOVEMBER 23, 1959. IN THAT CASE, A BIDDER ALSO FURNISHED A DEFICIENT BID BOND WITH ITS BID AND IN THE DECISION WHICH DETERMINED THAT THE ACTION OF THE CONTRACTING OFFICER IN REJECTING THE BID WAS NOT IMPROPER, IT WAS INDICATED THAT A DEFICIENCY IN THE AMOUNT OF THE BID BOND WAS JUST AS SIGNIFICANT AS FURNISHING NO BID BOND AT ALL. IN THAT CONNECTION, IT WAS SAID:

"* * * THE LANGUAGE OF THE INVITATION CLEARLY REQUIRES NOT MERELY THE SUBMISSION OF A BID BOND BUT OF A BID BOND IN NOT LESS THAN THE INDICATED AMOUNT. IF THE REQUIREMENT FOR SUBMISSION OF A BID BOND BY THE TERMS OF THE INVITATION IS TO BE REGARDED AS MATERIAL IT LOGICALLY FOLLOWS THAT THE REQUIREMENT AS TO THE AMOUNT OF THE BID IS EQUALLY MATERIAL.'

IN VIEW OF THE PRECEDENTS THUS ESTABLISHED AND THE REASONS THEREFOR, AND SINCE UNDER THE PROCUREMENT LAWS ALL BIDDERS MUST BE REQUIRED TO COMPETE ON AN EQUAL BASIS, WE HAVE NO ALTERNATIVE BUT TO CONCLUDE THAT THE REJECTION OF THE BID OF YOUR COMPANY FOR NONRESPONSIVENESS WAS LEGALLY REQUIRED.