B-159498, JULY 6, 1966, 46 COMP. GEN. 11

B-159498: Jul 6, 1966

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THE FAILURE OF A BIDDER UNABLE TO OBTAIN A BID BOND TO COMPLY WITH THE INVITATION REQUIREMENT FOR SUBMISSION OF A BOND MAY NOT BE WAIVED AS AN INFORMALITY OR MINOR IRREGULARITY ON THE BASIS THAT THE INVITATION STATED THAT SUCH FAILURE MAY BE CAUSE FOR REJECTION AND THEREFORE REJECTION IS NOT REQUIRED. A CLAUSE PRESCRIBED BY SECTION 1 10.103-3 OF THE FEDERAL PROCUREMENT REGULATIONS AND CORRECTLY STATING IN CONNECTION WITH THE NAMED SITUATIONS IN SECTION 1-10.103-4 IN WHICH FAILURE TO FURNISH A REQUIRED BID BOND IS WAIVABLE. EVEN THOUGH THE CLAUSE WOULD BE MORE PRECISE AND MORE INFORMATIVE TO BIDDERS IF IT STATED THAT FAILURE TO FURNISH A BID BOND WILL REQUIRE REJECTION OF THE BID IN ALL CASES EXCEPT THOSE LISTED IN SECTION 1-10.103- 4 AND MAY BE CAUSE FOR REJECTION EVEN THEN.

B-159498, JULY 6, 1966, 46 COMP. GEN. 11

CONTRACTS - SPECIFICATIONS - FAILURE TO FURNISH SOMETHING REQUIRED - BID BOND - FAILURE TO FURNISH ,MAY BE" CAUSE FOR REJECTION. THE FAILURE OF A BIDDER UNABLE TO OBTAIN A BID BOND TO COMPLY WITH THE INVITATION REQUIREMENT FOR SUBMISSION OF A BOND MAY NOT BE WAIVED AS AN INFORMALITY OR MINOR IRREGULARITY ON THE BASIS THAT THE INVITATION STATED THAT SUCH FAILURE MAY BE CAUSE FOR REJECTION AND THEREFORE REJECTION IS NOT REQUIRED, A CLAUSE PRESCRIBED BY SECTION 1 10.103-3 OF THE FEDERAL PROCUREMENT REGULATIONS AND CORRECTLY STATING IN CONNECTION WITH THE NAMED SITUATIONS IN SECTION 1-10.103-4 IN WHICH FAILURE TO FURNISH A REQUIRED BID BOND IS WAIVABLE, THAT SUCH FAILURE "MAY BE" CAUSE FOR REJECTION, AND EVEN THOUGH THE CLAUSE WOULD BE MORE PRECISE AND MORE INFORMATIVE TO BIDDERS IF IT STATED THAT FAILURE TO FURNISH A BID BOND WILL REQUIRE REJECTION OF THE BID IN ALL CASES EXCEPT THOSE LISTED IN SECTION 1-10.103- 4 AND MAY BE CAUSE FOR REJECTION EVEN THEN, THE REGULATIONS HAVING THE FORCE AND EFFECT OF LAW, THE FAILURE OF THE BIDDER TO FURNISH A BID BOND CANNOT BE WAIVED AND REQUIRES BID REJECTION.

TO KAHR BEARING CORPORATION, MARINE DIVISION, JULY 6, 1966:

REFERENCE IS MADE TO YOUR TELEGRAM OF JUNE 21 AND LETTER OF JUNE 22, 1966, PROTESTING THE REJECTION OF YOUR BID UNDER COAST GUARD INVITATION FOR BIDS NO. 916406-0 ISSUED MAY 20, 1966.

THE INVITATION, WHICH SOLICITED BIDS FOR THE FURNISHING OF THREE SHIP SETS OF JOINER MATERIALS, ELICITED THREE BIDS BY BID OPENING ON JUNE 16, 1966, YOURS IN THE AMOUNT OF $624,000, AND TWO OTHERS IN THE AMOUNTS OF $734,700 AND $857,340. THE INVITATION CONTAINED THE FOLLOWING REQUIREMENT:

BONDS:

BID BOND: BID BOND IN THE AMOUNT OF 20 PERCENT OF BID PRICE, BUT NOT TO EXCEED $3,000,000.00 IS REQUIRED. FAILURE TO FURNISH A BID BOND AT THE TIME SET FOR OPENING OF BIDS MAY BE CAUSE FOR REJECTION OF BID.

PAYMENT AND PERFORMANCE BONDS: THE SUCCESSFUL BIDDER SHALL BE REQUIRED TO FURNISH A PAYMENT BOND AND A PERFORMANCE BOND IN AN AMOUNT EQUAL TO 50 PERCENT OF THE CONTRACT AWARD PRICE.

NO BID BOND WAS SUBMITTED WITH YOUR BID. IN YOUR LETTER OF JUNE 22, 1966, YOU STATE THAT YOU MADE EVERY EFFORT TO OBTAIN A BID BOND BUT WERE UNABLE TO DO SO BECAUSE OF YOUR CURRENT FINANCIAL STATUS.

YOU ARGUE THAT THE INVITATION STATES MERELY THAT FAILURE TO FURNISH A BID BOND MAY BE CAUSE FOR REJECTION, NOT THAT REJECTION IS REQUIRED, AND THAT THE OMISSION SHOULD BE WAIVED AS AN INFORMALITY OR MINOR IRREGULARITY. YOU CITE IN THIS CONNECTION THE ADELHARDT CASE, 123 CT. CL. 456, 107 F. SUPP. 845, DECIDED IN 1952.

THE QUESTION AS TO THE MATERIALITY OF A BIDDER'S FAILURE TO FURNISH A REQUIRED BID BOND HAS BEEN BEFORE OUR OFFICE MANY TIMES. PRIOR TO OUR DECISION IN 1959 AT 38 COMP. GEN. 532 THE RULE WAS THAT AN INADVERTENT FAILURE TO FURNISH A REQUIRED BID BOND SHOULD BE WAIVED, PROVIDED THE FAILURE WAS NOT DUE TO THE BIDDER'S INABILITY TO SECURE SUCH A BOND. THUS, EVEN UNDER THAT RULE, A WAIVER OF YOUR FAILURE WOULD NOT HAVE BEEN PROPER. IN THE CASE OF BROOKFIELD CONSTRUCTION COMPANY, INC., 234 F. SUPP. 94 (1964), THE COURT UPHELD A DECISION OF OUR OFFICE WHICH REQUIRED REJECTION OF A BID BOND WHICH WAS ACCOMPANIED BY A BID BOND DEFICIENT IN AMOUNT ($1,100,000 INSTEAD OF $1,1738500)DESPITE THE FACT THAT AN ADEQUATE BOND WAS OFFERED AFTER BID OPENING. THE COURT STATED:

THIS COURT MAY NOT SET ASIDE THE DECISION OF THE COMPTROLLER GENERAL, FIRST, BECAUSE IT IS NOT ERRONEOUS AS A MATTER OF LAW, BUT MERELY REFUSES TO MAKE AN EXCEPTION TO A RIGID RULE; AND ALSO, BECAUSE NO JUSTICIABLE CONTROVERSY IS PRESENTED * * *.

IT SHOULD BE NOTED THAT THE REGULATIONS PROMULGATED AS A RESULT OF OUR DECISION IN 1959, E. G., SECTION 1-10.103-4 OF THE FEDERAL PROCUREMENT REGULATIONS (FPR), WHICH IMPOSE AN EVEN STRICTER RULE, WERE NOT APPLICABLE IN THE BROOKFIELD CASE.

SECTION 1-10.103-4 OF THE FPR DOES, HOWEVER, APPLY TO THE INSTANT PROCUREMENT. IT STATES THAT WHERE AN INVITATION FOR BIDS REQUIRES THE SUBMISSION OF A BID BOND "THE BID SHALL BE REJECTED" FOR NONCOMPLIANCE, EXCEPT IN FOUR NAMED SITUATIONS, NONE OF WHICH IS APPLICABLE HERE. SECTION 1-10.103-3 OF THE FPR PRESCRIBES THE CLAUSE TO BE USED IN THE INVITATION, WHICH WAS USED IN THE PRESENT CASE. BECAUSE OF THE FOUR SITUATIONS IN WHICH FAILURE TO FURNISH A REQUIRED BID BOND IS WAIVABLE, THE CLAUSE IS CORRECT IN STATING THAT SUCH FAILURE "MAY BE" CAUSE FOR REJECTION. HOWEVER, WE BELIEVE THE CLAUSE WOULD BE MORE PRECISE AND MORE INFORMATIVE TO BIDDERS IF IT STATED THAT FAILURE TO FURNISH THE BOND WILL REQUIRE REJECTION OF THE BID IN ALL CASES EXCEPT THOSE LISTED IN FPR 1- 10.103-4 AND MAY BE CAUSE FOR REJECTION EVEN THEN.

IT SHOULD BE NOTED THAT THE SECTIONS OF THE REGULATIONS MENTIONED ABOVE WERE PROMULGATED BY THE ADMINISTRATOR OF GENERAL SERVICES IN IMPLEMENTATION OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 40 U.S.C. 471 NOTE; WERE PUBLISHED IN THE FEDERAL REGISTER; AND MAY BE CONSIDERED TO HAVE THE FORCE AND EFFECT OF LAW. MAY ALSO BE NOTED THAT NO SUCH BID BOND REGULATIONS WERE IN EFFECT AT THE TIME THE ADELHARDT CASE WAS DECIDED.

IT IS CLEAR THAT UNDER THE REGULATIONS APPLICABLE TO THE PRESENT INVITATION YOUR FAILURE TO FURNISH A BID BOND CANNOT BE WAIVED AND REQUIRES REJECTION OF YOUR BID. CONSEQUENTLY, WE ARE COMPELLED TO DENY YOUR PROTEST.