B-148403, MAY 15, 1962, 41 COMP. GEN. 758

B-148403: May 15, 1962

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IS AMBIGUOUS AS TO WHETHER THE AMOUNT OF THE BOND SHOULD COVER THE OPTIONAL QUANTITIES. WHICH WAS IN ACCORD WITH THE PROCUREMENT AGENCY'S INTENT TO EVALUATE BIDS ON THE BASIC BID ALONE. AWARD TO THE LOW BIDDER SUBMITTING A BID BOND IN AN AMOUNT EXCLUDING THE OPTIONAL QUANTITIES WAS NOT IMPROPER. 1962: REFERENCE IS MADE TO YOUR LETTER DATED MARCH 14. YOUR PROTEST IS PREDICATED ON YOUR CONTENTION THAT LAVOIE SUBMITTED A BID BOND INSUFFICIENT IN AMOUNT AND THEREFORE LAVOIE'S BID SHOULD HAVE BEEN REJECTED AS NONRESPONSIVE TO THE TERMS OF THE INVITATION FOR BIDS. ITEM 12 WAS SET OUT IN THE INVITATION AS FOLLOWS: OPTIONAL QUANTITIES. 45 EACH A PROVISION ON PAGE 4 OF THE INVITATION PROVIDES THAT AWARD OF ANY OR ALL ITEMS WILL BE MADE TO ONE BIDDER.

B-148403, MAY 15, 1962, 41 COMP. GEN. 758

BONDS - BID - SUFFICIENCY ALTHOUGH THE BID BOND PROVISION REQUIRING SUBMISSION OF BID BONDS IN AN AMOUNT EQUAL TO 5 PERCENT OF THE BID IN AN INVITATION FOR FURNISHING NUMEROUS ITEMS, PLUS AN ITEM FOR OPERATIONAL AND CONTINGENT QUANTITIES TO BE DETERMINED AFTER AWARD, IS AMBIGUOUS AS TO WHETHER THE AMOUNT OF THE BOND SHOULD COVER THE OPTIONAL QUANTITIES, THE FACT THAT THE LOW BIDDER, AS WELL AS 50 PERCENT OF THE OTHER BIDDERS, SUBMITTED A BID BOND IN AN AMOUNT NOT INCLUDING THE OPTIONAL QUANTITIES, WHICH WAS IN ACCORD WITH THE PROCUREMENT AGENCY'S INTENT TO EVALUATE BIDS ON THE BASIC BID ALONE, NO INJUSTICE TO THE COMPETITIVE POSITION OF THE BIDDERS RESULTED FROM THE AMBIGUITY; THEREFORE, AWARD TO THE LOW BIDDER SUBMITTING A BID BOND IN AN AMOUNT EXCLUDING THE OPTIONAL QUANTITIES WAS NOT IMPROPER.

TO THE GENERAL INSTRUMENT CORPORATION, MAY 15, 1962:

REFERENCE IS MADE TO YOUR LETTER DATED MARCH 14, 1962, PROTESTING AGAINST THE AWARD OF A CONTRACT FOR A QUANTITY OF RADAR SETS BY THE UNITED STATES COAST GUARD TO THE LAVOIE LABORATORIES, INC., MORGANVILLE, NEW JERSEY, UNDER INVITATION FOR BIDS NO. CG-54,002-A ISSUED ON JANUARY 3, 1962. YOUR PROTEST IS PREDICATED ON YOUR CONTENTION THAT LAVOIE SUBMITTED A BID BOND INSUFFICIENT IN AMOUNT AND THEREFORE LAVOIE'S BID SHOULD HAVE BEEN REJECTED AS NONRESPONSIVE TO THE TERMS OF THE INVITATION FOR BIDS.

ITEM 1 OF THE SUBJECT INVITATION CALLED FOR BIDS ON OPTIONAL QUANTITIES OF 15, 20 OR 25 RADAR SETS IN ACCORDANCE WITH U.S. COAST GUARD PURCHASE DESCRIPTION NO. EEE-7-62 DATED NOVEMBER 22, 1961. ITEMS 2 THROUGH 11 CALLED FOR A PROTOTYPE MODEL OF ITEM 1 AND SPECIFIED QUANTITIES OF MANUALS, DRAWINGS, OPERATING INSTRUCTIONS, ETC. ITEM 12 WAS SET OUT IN THE INVITATION AS FOLLOWS:

OPTIONAL QUANTITIES, ADDITIONAL QUANTITIES OF RADAR SETS, AS DESCRIBED UNDER ITEM 1 ABOVE, WITH OPTION OF ACCEPTANCE WITHIN EIGHTEEN (18) MONTHS OF DATE OF CONTRACT AWARD, AS FOLLOWS:

(A) FOR FURNISHING ---------------------------------------- 30 EACH OR (B) FOR FURNISHING ---------------------------------------- 35 EACH OR (C) FOR FURNISHING ---------------------------------------- 45 EACH

A PROVISION ON PAGE 4 OF THE INVITATION PROVIDES THAT AWARD OF ANY OR ALL ITEMS WILL BE MADE TO ONE BIDDER. ON PAGE 5 OF THE INVITATION APPEARS THE FOLLOWING PROVISION WITH RESPECT TO THE FURNISHING OF A BID BOND:

BIDDERS SHALL FURNISH BID BOND, STANDARD FORM NO. 24, CERTIFIED CHECK OR MONEY ORDER, EQUAL TO FIVE PERCENT (5 PERCENT) OF BID, MADE PAYABLE TO THE UNITED STATES COAST GUARD. THREE COPIES OF BID BOND, STD. FORM NO. 24, ARE ENCLOSED.

BIDS WERE OPENED ON FEBRUARY 20, 1962. SEVEN BIDDERS RESPONDED TO THE INVITATION. INSTRUMENTS FOR INDUSTRY, INC., WAS THE LOW BIDDER ON ITEMS 1 THROUGH 11 IN THE ALTERNATE AMOUNTS OF $431,520, $499,520 AND $562,020, BUT FAILED TO SUBMIT A BID BOND. THE SECOND LOW BIDDER ON ITEMS 1 THROUGH 11 IN THE ALTERNATE AMOUNTS OF $584,217, $665,572 AND $749,907 WAS CARDION ELECTRONICS, INC. HOWEVER, CARDION'S BID WAS REJECTED AS NONRESPONSIVE TO THE REQUIREMENTS OF THE SPECIFICATIONS. THE THIRD LOW BIDDER ON ITEMS 1 THROUGH 11 WAS LAVOIE LABORATORIES, INC., IN THE ALTERNATE AMOUNTS OF $620,247, $706,197 AND $783,622. YOUR BID PRICES FOR THESE ITEMS WERE $660,226, $742,476 AND $814,976. AWARD OF THE CONTRACT FOR ITEMS 1 (A), 2, 3, 4, 5, 6, 7, 8, 9, 10 AND 11 IN THE AMOUNT OF $620,247 WAS MADE TO LAVOIE LABORATORIES, INC., ON MARCH 7, 1962.

IN YOUR LETTER OF MARCH 14, 1962, YOU CONTEND THAT SINCE LAVOIE'S BID PRICES ON ITEMS 1 THROUGH 11 AND THE OPTIONAL QUANTITIES INCLUDED IN ITEM 12 AMOUNTED TO $1,117,047, $1,253,597 AND $1,446,022, RESPECTIVELY, LAVOIE SHOULD HAVE SUBMITTED A BID BOND IN THE AMOUNT OF $72,301 RATHER THAN THE ACTUAL BOND WHICH THAT COMPANY FURNISHED IN THE PENAL SUM OF $42,000. YOU STATE THAT THE COAST GUARD'S ACTION IN AWARDING THE CONTRACT TO LAVOIE WAS NOT CONSISTENT WITH OUR DECISIONS IN B-137319, FEBRUARY 5, 1959 (38 COMP. GEN. 532), AND B-142824, JUNE 10, 1960 (39 COMP. GEN. 827); THAT UNDER THE INVITATION BIDDERS WERE REQUIRED TO SUBMIT BIDS ON ALL ITEMS AND ACCORDINGLY BIDDERS WERE REQUIRED TO FURNISH A BID BOND IN THE AMOUNT OF 5 PERCENT OF THE TOTAL OF THEIR BIDS, WHICH INCLUDED THE OPTIONAL QUANTITIES OF ITEM 12. YOU CONCLUDE THAT THE OPTIONAL QUANTITIES SET OUT IN ITEM 12 CONFERRED DEFINITE RIGHTS IN THE GOVERNMENT FOR WHICH IT REQUIRED BOND PROTECTION, AND SUCH RIGHTS SHOULD NOT BE WAIVED BY THE COAST GUARD.

PRIOR TO OUR DECISION IN 38 COMP. GEN. 532 THE LONGSTANDING RULE WITH REGARD TO THE FAILURE OF A BIDDER TO SUBMIT A BID BOND WHEN REQUIRED BY THE TERMS OF THE INVITATION WAS THAT SUCH FAILURE MAY AND SHOULD BE WAIVED IF THE FAILURE TO FURNISH THE BOND WAS DUE TO INADVERTENCE OR OTHER EXCUSABLE CAUSE NOT RELATED TO THE BIDDER'S FINANCIAL ABILITY TO SECURE THE BOND. HOWEVER, FOR THE REASONS STATED IN 38 COMP. GEN. 532, WE HELD THAT THIS RULE WOULD NO LONGER BE FOLLOWED AND, THEREAFTER, NONCOMPLIANCE WITH A BID BOND FURNISHING PROVISION IN AN INVITATION FOR BIDS WOULD REQUIRE REJECTION OF THE BID AS NONRESPONSIVE.

IN 39 COMP. GEN. 827 THE INVITATION SOLICITED BIDS FOR EIGHT ITEMS FOR THE REHABILITATION AND CONVERSION TO PUBLIC QUARTERS OF A WHERRY HOUSING PROJECT. ITEM 1 CALLED FOR 850 CUBIC YARDS OF BASE COURSE, ITEM 3 COVERED THE ENTIRE PROJECT AND THE REMAINING ITEMS COVERED THE WHOLE PROJECT WITH VARIOUS DELETIONS. BY THE TERMS OF THE INVITATION, EACH BID WAS REQUIRED TO BE ACCOMPANIED BY A BID BOND IN THE AMOUNT OF THE LARGEST AMOUNT FOR WHICH AWARD COULD BE MADE (ITEM NO. 3). HOWEVER, THE LOW BID WAS ACCOMPANIED BY A BID BOND COVERING ONLY 10 PERCENT OF THE AMOUNT BECAUSE OF A CLERICAL ERROR BY THE SURETY. WE HELD ON THESE FACTS THAT THE FAILURE TO SUBMIT A BID BOND IN SUFFICIENT AMOUNT COULD NOT BE WAIVED AS AN IMMATERIAL DEVIATION.

WE DO NOT AGREE THAT THE PRESENT CASE IS CONTROLLED BY THE DECISIONS ABOVE DISCUSSED. IT SHOULD FIRST BE NOTED THAT THE DECISION IN 38 COMP. GEN. 532 DEALT WITH THE FAILURE TO FURNISH ANY BOND RATHER THAN ONE MERELY DEFICIENT IN AMOUNT. B-140330, SEPTEMBER 30, 1959. SECONDLY, THE DECISION IN 39 COMP. GEN. 827 WAS CONCERNED WITH A SITUATION IN WHICH THERE COULD BE NO DOUBT AS TO THE AMOUNT OF THE BID BOND CALLED FOR BY THE INVITATION FOR BIDS SINCE THE INVITATION IN THAT CASE SPECIFICALLY REQUIRED A BOND IN THE AMOUNT OF 20 PERCENT OF THE LARGEST AMOUNT FOR WHICH AWARD COULD BE MADE. IN THE INSTANT CASE THE INVITATION MERELY CALLED FOR A BID BOND EQUAL TO 5 PERCENT OF BID.

ADMITTEDLY, THE WORDS "FIVE PERCENT OF BID" AS APPLIED TO THE PRESENT PROCUREMENT INVOLVING, AS IT DOES, OPTIONAL QUANTITIES IS AMBIGUOUS. HOWEVER, THE CIRCUMSTANCES IN THIS CASE ARE MORE PERSUASIVE IN FAVOR OF THE MEANING ADOPTED BY THE COAST GUARD THAN THAT CONTENDED FOR BY YOU. MOREOVER, WE DO NOT THINK THAT SUCH AMBIGUITY CREATED AN UNFAIR BIDDING SITUATION WHICH WOULD JUSTIFY ANY ACTION BY THIS OFFICE.

THE COAST GUARD, IN A REPORT DATED APRIL 11, 1962, STATES THAT THE INTERPRETATION BY 50 PERCENT OF THE COMPANIES SUBMITTING BONDS WAS IN AGREEMENT WITH COAST GUARD INTENT THAT THE BID BONDS WERE NOT TO INCLUDE THE COST OF OPTIONAL ITEM 12, AND THAT THE WORDING OF ITEM 12 SUBSTANTIATES THE COAST GUARD INTENT BY INDICATING THAT ITEM 12 COULD NOT BE EXERCISED UNTIL THE CONTRACT HAD BEEN AWARDED. ITEM 12, IT WILL BE NOTED, IS STATED IN THE TERMS OF AN "OPTION OF ACCEPTANCE WITHIN EIGHTEEN (18) MONTHS OF DATE OF CONTRACT AWARD.' AN OPTION HAS BEEN DEFINED AS A PRIVILEGE OR RIGHT OF ELECTION TO EXERCISE A PRIVILEGE. LIVELY V. TABOR, 107 S.W.2D 62, 66; THACKER V. FLOTTMANN, 244 S.W.2D 1020. COMPARE, NORWOOD V. ADAMS, 51 S.W.2D 625, 626 AND SMITH V. RUSS, 339 P.2D 286, 290. AN OPTION IS NOT A TRANSFER OF PROPERTY AND NO TITLE IS CONVEYED THEREBY. IT IS A MERE RIGHT OF ELECTION ACQUIRED BY ONE UNDER A CONTRACT TO ACCEPT OR REJECT A PRESENT OFFER WITHIN THE TIME THEREIN FIXED. WARE V. QUIGLEY, 169 P. 377. SEE, ALSO, BOYER V. NESBITT, 76 A. 103, 105, WHICH POINTS OUT THAT IN A SENSE ALL OPTIONS ARE CONTINGENT BECAUSE THEY MAY OR MAY NOT BE EXERCISED WITHIN THE TIME OR UPON THE CONDITIONS STIPULATED.

IN THE PRESENT CASE THE BIDS WERE EVALUATED ON THE BASIS OF ITEMS 1 THROUGH 11 WITHOUT REGARD TO THE OPTIONAL QUANTITIES IN ITEM 12. THIS METHOD OF EVALUATION WAS PROPER SINCE WE HAVE HELD THAT IT WOULD BE IMPROPER TO ACCEPT A HIGH BID UPON THE BASIS THAT IT WILL BECOME LOW UPON THE OCCURRENCE OF A CONTINGENCY THAT MIGHT OR MIGHT NOT ARISE. 15 COMP. GEN. 1136; 41 ID. 203. THERE IS NO ASSURANCE WHATEVER THAT THE COAST GUARD WILL EXERCISE THE OPTION CONTAINED IN ITEM 12. AND IT COULD NOT BE EXERCISED UNTIL AFTER THE AWARD OF THE CONTRACT ON ITEMS 1 THROUGH 11. SUCH AN EXERCISE IS CONTINGENT UPON THE COAST GUARD'S NEEDS FOR ADDITIONAL RADAR SETS WITHIN THE 18-MONTH OPTIONAL PERIOD AND UPON THE AVAILABILITY OF FUNDS FOR THE SATISFACTION OF THOSE NEEDS. SINCE EVALUATION OF BIDS AND AWARD OF A CONTRACT COULD ONLY HAVE BEEN MADE ON ITEMS 1 THROUGH 11 THERE WAS NO NECESSITY FOR REQUIRING A BID BOND TO COVER THE OPTIONAL AND CONTINGENT QUANTITIES IN ITEM 12 AS WELL.

THE USE OF A BID BOND IS, IN THE VAST MAJORITY OF CASES, NOT REQUIRED BY STATUTE, BUT IS SOLELY A MATTER OF ADMINISTRATIVE JUDGMENT AND DISCRETION. DETERMINATIONS TO REQUIRE THE SUBMISSION OF SUCH A BOND ARE MADE IN LIGHT OF PROTECTING THE GOVERNMENT'S INTEREST. IN VIEW OF THE FACT THAT THE AWARD MADE TO LAVOIE COMES WITHIN THE 5 PERCENT PENAL AMOUNT OF THE BOND, IT IS APPARENT THAT THE PURPOSE THAT A BID BOND IS DESIGNED TO ACCOMPLISH WAS FULFILLED AND THE GOVERNMENT IS PROTECTED.

AS NOTED PREVIOUSLY THE INVITATION FOR BIDS IS AMBIGUOUS ON THE AMOUNT OF THE BOND REQUIRED TO BE FURNISHED. HOWEVER, FOR THE REASONS STATED ABOVE, WE DO NOT BELIEVE THAT THE INTERPRETATION ADOPTED BY YOU IN DETERMINING THE PENAL SUM OF THE BOND TO BE FURNISHED IS AS PERSUASIVE AS THAT ADOPTED BY THE COAST GUARD. NOR DOES IT APPEAR THAT ANY INJUSTICE TO THE COMPETITIVE POSITION OF BIDDERS RESULTED FROM THE AMBIGUITY IN THE SUBJECT INVITATION. HOWEVER, A COPY OF THIS DECISION WILL BE FORWARDED TO THE COAST GUARD WITH THE VIEW THAT IT WILL TAKE STEPS TO INSURE AGAINST A RECURRENCE OF SUCH AMBIGUITIES IN FUTURE INVITATIONS FOR BIDS ISSUED BY THAT AGENCY.