B-160507, DEC. 27, 1966

B-160507: Dec 27, 1966

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TO PORTERSVILLE EQUIPMENT: REFERENCE IS MADE TO YOUR PROTEST AGAINST THE REJECTION OF THE BID OF YOUR COMPANY FOR 20 SEMITRAILERS DESCRIBED IN INVITATION FOR BIDS 667-20. THE BID FROM YOUR COMPANY WAS ONE OF FOUR RECEIVED. 400 BID FROM YOUR COMPANY WAS NOT ACCOMPANIED BY A BID BOND. THE INVITATION PROVIDED: "BONDS "/A) BID GUARANTEE - ALL BIDDERS ARE REQUIRED TO FURNISH BID GUARANTEE IN THE AMOUNT NOT LESS THAN 20 PERCENT OF TOTAL BID PRICE. THE CLAUSE PROVIDED ALSO THAT THE SUCCESSFUL BIDDER WILL BE REQUIRED TO FURNISH A PERFORMANCE BOND. YOU HAVE INDICATED THAT YOUR COMPANY DID NOT SUBMIT A BID BOND BECAUSE SMALL BUSINESS REPRESENTATIVES OF THE DEPARTMENT OF DEFENSE HAD ADVISED YOU THAT THE BOND REQUIREMENT WAS UNUSUAL FOR A SUPPLY CONTRACT.

B-160507, DEC. 27, 1966

TO PORTERSVILLE EQUIPMENT:

REFERENCE IS MADE TO YOUR PROTEST AGAINST THE REJECTION OF THE BID OF YOUR COMPANY FOR 20 SEMITRAILERS DESCRIBED IN INVITATION FOR BIDS 667-20, ISSUED BY THE BUREAU OF MINES, HELIUM ACTIVITY, AMARILLO, TEXAS.

THE BID FROM YOUR COMPANY WAS ONE OF FOUR RECEIVED. HOWEVER, BECAUSE THE $823,400 BID FROM YOUR COMPANY WAS NOT ACCOMPANIED BY A BID BOND, THE CONTRACTING AGENCY PROPOSES TO REJECT THE BID. IN THAT CONNECTION, THE INVITATION PROVIDED:

"BONDS

"/A) BID GUARANTEE - ALL BIDDERS ARE REQUIRED TO FURNISH BID GUARANTEE IN THE AMOUNT NOT LESS THAN 20 PERCENT OF TOTAL BID PRICE.

"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.'

THE CLAUSE PROVIDED ALSO THAT THE SUCCESSFUL BIDDER WILL BE REQUIRED TO FURNISH A PERFORMANCE BOND.

YOU HAVE INDICATED THAT YOUR COMPANY DID NOT SUBMIT A BID BOND BECAUSE SMALL BUSINESS REPRESENTATIVES OF THE DEPARTMENT OF DEFENSE HAD ADVISED YOU THAT THE BOND REQUIREMENT WAS UNUSUAL FOR A SUPPLY CONTRACT, AND BECAUSE IT IS NEARLY IMPOSSIBLE FOR A SMALL COMPANY LIKE YOURS TO OBTAIN A BOND FOR A PROCUREMENT AS LARGE AS THE IMMEDIATE ONE. IN VIEW OF THE FOREGOING, AND SINCE THE BOND PROVISION IN THE INVITATION INDICATED THAT FAILURE TO FURNISH A BID GUARANTEE MAY BE CAUSE FOR REJECTION, YOU BELIEVED THAT THE BID BOND DEFICIENCY MIGHT BE WAIVED.

FEDERAL PROCUREMENT REGULATIONS (FPR) SECTION 1-10.104-2 PROVIDES THAT PERFORMANCE BONDS MAY BE REQUIRED FOR OTHER THAN CONSTRUCTION CONTRACTS WHEN IT IS ESSENTIAL TO THE BEST INTERESTS OF THE GOVERNMENT. THAT SECTION FURTHER PROVIDES THAT DETERMINATIONS TO REQUIRE PERFORMANCE BONDS SHALL BE MADE BY THE CONTRACTING OFFICER ON INDIVIDUAL PROCUREMENTS. THUS, AUTHORITY EXISTS FOR REQUIRING A PERFORMANCE BOND IN CONNECTION WITH A SUPPLY CONTRACT. ALSO, FPR SECTION 1-10.103-1 PROVIDES FOR A BID GUARANTEE ON PROCUREMENTS IN EXCESS OF $2,000 WHEN THE INVITATION SPECIFIES THAT A CONTRACT MUST BE SUPPORTED BY A PERFORMANCE BOND. MOREOVER, SECTION 1-10.103-3 OF THE REGULATIONS AUTHORIZES THE USE OF SUBSTANTIALLY THE SAME STATEMENT REGARDING BID GUARANTEES AS WAS INCLUDED IN THE IMMEDIATE INVITATION, INCLUDING THE PHRASE "MAY BE CAUSE FOR REJECTION OF THE BID" IN EVENT OF NONCOMPLIANCE WITH THE BID GUARANTEE REQUIREMENT. THEREFORE, THE INCLUSION OF THE BID GUARANTEE PROVISION IN THE INVITATION FOR BIDS WAS PROPER UNDER THE CIRCUMSTANCES OF THIS PROCUREMENT.

THE REGULATIONS ALSO PROVIDE THE ACTION THAT IS TO BE TAKEN WITH RESPECT TO A BID WHICH IS NOT ACCOMPANIED BY A REQUIRED BID GUARANTEE. IN THE EVENT THAT A BID IS NOT ACCOMPANIED BY THE REQUIRED BID BOND, FPR SECTION 1-2.404-2 (F) STATES:

"WHERE A BID GUARANTEE IS REQUIRED AND A BIDDER FAILS TO FURNISH IT IN ACCORDANCE WITH THE REQUIREMENTS OF THE INVITATION FOR BIDS, THE BID SHALL BE REJECTED EXCEPT AS OTHERWISE PROVIDED IN SEC. 1-10.102 5.'

THE REFERENCE TO SECTION 1-10.102-5 APPEARS INCORRECT SINCE THAT SECTION MERELY DEFINES AN ADVANCE PAYMENT BOND. THE SECTION WHICH APPEARS TO BE APPLICABLE HERE IS 1-10.103-4 PERTAINING TO THE FAILURE TO SUBMIT A PROPER BID GUARANTEE. THAT SECTION STATES:

"WHERE AN INVITATION FOR BIDS REQUIRES THAT A BID BE SUPPORTED BY A BID GUARANTEE AND NONCOMPLIANCE OCCURS, THE BID SHALL BE REJECTED * * *.'

THE SECTION GOES ON TO PROVIDE FOUR EXCEPTIONS TO THE RULE REQUIRING REJECTION; HOWEVER, THE IMMEDIATE SITUATION HERE DOES NOT COME WITHIN ANY OF THE ENUMERATED EXCEPTIONS.

OUR OFFICE PREVIOUSLY HAS CONSIDERED IN B-159498, JULY 6, 1966, 46 COMP. GEN. -, THE QUESTION WHETHER A BIDDER'S FAILURE TO FURNISH A REQUIRED BID BOND COULD BE WAIVED WHERE THE INVITATION EMPLOYED SUBSTANTIALLY THE SAME LANGUAGE AS APPEARS IN THE IMMEDIATE INVITATION. IN THE CITED CASE, THE BIDDER ALSO STATED THAT IT WAS UNABLE TO OBTAIN A BID BOND BECAUSE OF ITS FINANCIAL POSITION AND CONTENDED THAT INASMUCH AS THE INVITATION STATES MERELY THAT FAILURE TO FURNISH A BID BOND MAY BE CAUSE FOR REJECTION, THE OMMISSION SHOULD BE WAIVED AS AN INFORMALITY OR MINOR IRREGULARITY. RESPONSE TO THE CONTENTIONS MADE, WE HELD:

"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. (31 COMP. GEN. 20.) THUS, EVEN UNDER THAT RULE, A WAIVER OF YOUR FAILURE WOULD NOT HAVE BEEN PROPER. IN THE CASE OF BROOKFIELD CONSTRUCTION COMPANY, 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 $1,173,500) 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. * * *"

FURTHER, OUR OFFICE HAS HELD THAT THE STATEMENT IN THE BID GUARANTEE REQUIREMENT THAT FAILURE TO COMPLY "MAY BE CAUSE FOR REJECTION" IS JUST AS COMPELLING AND MATERIAL AS IF MORE POSITIVE LANGUAGE WERE EMPLOYED. 153036, FEBRUARY 19, 1965, AND CITATIONS THEREIN. ADDITIONALLY, IN B- 159498, SUPRA, OUR OFFICE POINTED OUT THAT THE BID GUARANTEE REGULATIONS WERE PROMULGATED BY THE GENERAL SERVICES ADMINISTRATION IN IMPLEMENTATION OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, AND ARE PUBLISHED IN THE FEDERAL REGISTER. IT WAS STATED, THEREFORE, THAT THE REGULATIONS MAY BE CONSIDERED TO HAVE THE FORCE AND EFFECT OF LAW. SEE, ALSO, B-156916, JUNE 30, 1965.

AS INDICATED ABOVE, THE RULE WITH RESPECT TO FAILURE TO FURNISH BID GUARANTEES WAS CHANGED WITH 38 COMP. GEN. 532. BEGINNING WITH THAT DECISION, WE HAVE CONSISTENTLY HELD THAT THE BID REQUIREMENT MUST BE CONSIDERED AS 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 CITED DECISION WE ADVISED THE HEADS OF THE DEPARTMENTS AND INDEPENDENT ESTABLISHMENTS, AGENCIES AND OTHERS, THAT IN THE FUTURE NONCOMPLIANCE WITH A REQUIREMENT IN THE INVITATION THAT BID SECURITY BE SUBMITTED WOULD BE HELD TO REQUIRE REJECTION OF THE BID AS NONRESPONSIVE. WE STATED THE BASIS FOR THE RULE ESTABLISHED BY THE DECISION 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.

OUR OFFICE WAS NOT ALONE IN THE VIEW THAT THE RULES RESPECTING FAILURE TO FURNISH BID BONDS NEEDED REVISION. PRIOR TO OUR DECISION, A CONGRESSIONAL COMMITTEE HAD EXPRESSED GRAVE CONCERN OVER THE FREQUENT WAIVER OF BID BONDS. SEE REPORT OF THE PROCUREMENT SUBCOMMITTEE OF THE HOUSE COMMITTEE ON ARMED SERVICES ENTITLED "INVESTIGATION OF BID BONDS," 82ND CONGRESS, 1951, WHEREIN IT WAS STATED THAT THE THEN EXISTING REGULATIONS RELATING TO WAIVER OF BID BONDS HAD NO JUSTIFICATION IN THE LAW AND SHOULD BE CHANGED.

WE THEREFORE HAVE NO ALTERNATIVE BUT TO CONCLUDE THAT THE REJECTION OF THE BID OF YOUR COMPANY FOR NONRESPONSIVENESS IS LEGALLY REQUIRED. ACCORDINGLY, YOUR PROTEST IS DENIED.