B-160846, APR. 11, 1967

B-160846: Apr 11, 1967

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TO LESOURD AND PATTEN: FURTHER REFERENCE IS MADE TO YOUR TELEFEX AND LETTER OF FEBRUARY 8. OPENING OF BIDS WAS ORIGINALLY SCHEDULED FOR DECEMBER 6. THE BID OPENING WAS POSTPONED UNTIL DECEMBER 14. THE APPARENT LOW BIDDER WAS MCCRAY MARINE CONSTRUCTION. IT WAS DETERMINED BY THE CONTRACTING OFFICER THAT THE MCCRAY BID SHOULD BE REJECTED AS NONRESPONSIVE FOR FAILURE TO FURNISH AN ACCEPTABLE BID BOND AT BID OPENING TIME. IT WAS RECOMMENDED THAT THE AWARD BE MADE TO THE SECOND LOW BIDDER. AWARD WAS MADE TO THAT BIDDER ON FEBRUARY 9. A STANDARD BID BOND WAS DELIVERED BY MCCRAY TO THE CONTRACTING OFFICER ON DECEMBER 15. THE DAY AFTER BIDS WERE OPENED. WAS AN INDEMNITY AGREEMENT IN THE REQUIRED AMOUNT AND WITH THE OTHER REQUISITE PROVISIONS WOULD HAVE INDEMNIFIED THE GOVERNMENT AGAINST CERTAIN LOSSES IN THE EVENT THE BIDDER FAILED TO ENTER INTO A CONTRACT IN ACCORDANCE WITH ITS BID.

B-160846, APR. 11, 1967

TO LESOURD AND PATTEN:

FURTHER REFERENCE IS MADE TO YOUR TELEFEX AND LETTER OF FEBRUARY 8, 1967, WITH ENCLOSURES, PROTESTING, ON BEHALF OF MCCRAY MARINE CONSTRUCTION, INC., THE REJECTION OF ITS BID AS NONRESPONSIVE BY THE SEATTLE DISTRICT CORPS OF ENGINEERS, UNDER INVITATION NO. DACW67-67-B 0012.

THE INVITATION, DATED NOVEMBER 15, 1966, SOLICITED BIDS FOR THE MAINTENANCE DREDGING OF EVERETT HARBOR AND SNOHOMIS RIVER, WASHINGTON. OPENING OF BIDS WAS ORIGINALLY SCHEDULED FOR DECEMBER 6, 1966, AT 2:00 P.M., P.S.T. BY AMENDMENT NO. 2 TO THE INVITATION, THE BID OPENING WAS POSTPONED UNTIL DECEMBER 14, 1966, AT 2:00 P.M., P.S.T. THE APPARENT LOW BIDDER WAS MCCRAY MARINE CONSTRUCTION, INC., IN THE AMOUNT OF $199,206. THE FIVE OTHER BIDS RECEIVED RANGED FROM $199,640 TO $363,692. IN LIEU OF THE STANDARD BID BOND FORM (STANDARD FORM 24), MCCRAY SUBMITTED WITH ITS BID A PRIVATE FORM (S-1881) EXECUTED BY THE AETNA CASUALTY AND SURETY COMPANY, ENTITLED "BID BOND SERVICE UNDERTAKING (CONTINUOUS FORM)," NO. 81S-5012 BC DATED DECEMBER 5, 1966.

IT WAS DETERMINED BY THE CONTRACTING OFFICER THAT THE MCCRAY BID SHOULD BE REJECTED AS NONRESPONSIVE FOR FAILURE TO FURNISH AN ACCEPTABLE BID BOND AT BID OPENING TIME. IT WAS RECOMMENDED THAT THE AWARD BE MADE TO THE SECOND LOW BIDDER, THE OSBERG CONSTRUCTION COMPANY, IN THE AMOUNT OF $199,640. AWARD WAS MADE TO THAT BIDDER ON FEBRUARY 9, 1967, OR PRIOR TO THE 60-DAY BID EXPIRATION DATE. A STANDARD BID BOND WAS DELIVERED BY MCCRAY TO THE CONTRACTING OFFICER ON DECEMBER 15, 1966, THE DAY AFTER BIDS WERE OPENED.

YOUR BRIEF DATED DECEMBER 21, 1966, ENCLOSED IN SUPPORT OF YOUR PROTEST, CONTENDS THAT THE BID BOND SERVICE UNDERTAKING, THOUGH INADVERTENTLY FILED IN LIEU OF THE PROPER BID BOND AND IRRESPECTIVE OF ITS DIFFERING FORM, WAS AN INDEMNITY AGREEMENT IN THE REQUIRED AMOUNT AND WITH THE OTHER REQUISITE PROVISIONS WOULD HAVE INDEMNIFIED THE GOVERNMENT AGAINST CERTAIN LOSSES IN THE EVENT THE BIDDER FAILED TO ENTER INTO A CONTRACT IN ACCORDANCE WITH ITS BID.

YOU ALLEGE THAT THE LANGUAGE OF THE BID BOND SERVICE UNDERTAKING WOULD HAVE ENABLED THE GOVERNMENT TO RECOVER IN THE SAME MANNER IT COULD HAVE RECOVERED UNDER STANDARD FORM 24 IN THE EVENT MCCRAY FAILED OR REFUSED TO ENTER INTO A CONTRACT IN ACCORDANCE WITH ITS BID, SINCE ARTICLE 1 OF THE UNDERTAKING IS UNQUALIFIEDLY STATED AS FOLLOWS: "THE SURETY COMPANY HAS EXECUTED OR WILL EXECUTE THE INITIAL BID BOND.' FURTHER, YOUR BRIEF STATES THAT THERE IS A FIRM "IRREVOCABLE" UNDERTAKING BY AETNA IN FAVOR OF THE UNITED STATES OF AMERICA; THAT THE PENAL AMOUNT IS 20 PERCENT OF THE AMOUNT BID AS REQUIRED BY THE INVITATION FOR BIDS; THAT THE UNDERTAKING RECITES THE EXECUTION ON A DATE CERTAIN OF A BID BOND, AND THAT ALL MATERIAL REQUIREMENTS OF THE GOVERNMENT IN RESPECT TO A BID BOND WERE MET BY MCCRAY WHEN IT FILED ITS BID. YOU CITE OUR DECISIONS AT 38 COMP. GEN. 532; 39 COMP. GEN. 60; ID. 83; AND AT 41 COMP. GEN. 585, AS SUPPORTING YOUR PROTEST.

THE ISSUE PRESENTED IS WHETHER THE BID BOND UNDERTAKING WAS A BID BOND WITHIN THE PURVIEW OF PARAGRAPH 4,"INSTRUCTIONS TO BIDDERS," AND IF NOT, WHETHER IT SUFFICED IN ITSELF, THOUGH DIFFERING IN FORM, TO SERVE THE PURPOSE OF INDEMNIFICATION REQUIRED BY PERTINENT PROVISIONS OF THE INVITATION, THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) AND THE DECISIONS OF OUR OFFICE.

THE INVITATION FOR BIDS PROVIDED THAT EACH BIDDER SHALL SUBMIT WITH ITS BID A BOND (STANDARD FORM 24) WITH GOOD AND SUFFICIENT SURETY OR SURETIES ACCEPTABLE TO THE GOVERNMENT, OR OTHER SECURITY AS PROVIDED IN PARAGRAPH 4 OF "INSTRUCTIONS TO BIDDERS" (STANDARD FORM 22) IN THE FORM OF 20 PERCENT (20 PERCENT) OF THE BID PRICE OR $3,000,000, WHICHEVER IS LESSER. THE SAME PARAGRAPH PROVIDED THAT WHERE A BID GUARANTEE IS REQUIRED BY THE INVITATION FOR BIDS, FAILURE TO FURNISH A BID GUARANTEE IN THE PROPER FORM AND AMOUNT, BY THE TIME SET FOR OPENING OF BIDS, MAY BE CAUSE FOR REJECTION OF THE BID. IT FURTHER PROVIDED THAT A BID GUARANTEE SHALL BE IN THE FORM OF A FIRM COMMITMENT, SUCH AS A BID BOND, POSTAL MONEY ORDER, CERTIFIED CHECKS, CASHIER'S CHECK, IRREVOCABLE LETTER OF CREDIT OR, IN ACCORDANCE WITH TREASURY DEPARTMENT REGULATIONS, CERTAIN BONDS OR NOTES OF THE UNITED STATES. SEE ALSO ASPR 10-102.4 (A).

THE FACE OF THE BID BOND UNDERTAKING SHOWS THAT ON DECEMBER 5, 1966, "MCCRAY MARINE CONSTRUCTION, INC., HAS APPLIED FOR AND THE SURETY COMPANY HAS EXECUTED OR IS ABOUT TO EXECUTE A BID BOND IN BEHALF OF THE CONTRACTOR" WITH THE U.S.A. AS OBLIGEE FOR 20 PERCENT OF THE AMOUNT BID. THE DATE OF BID BOND IS SHOWN AS DECEMBER 14, 1966, AND THE OPENING OF BIDS AS OF THE SAME DATE. AS WORDED, THE "SERVICE UNDERTAKING" REASONABLY MAY BE INTERPRETED AS A PROMISE TO EXECUTE, IN FUTURE, A PROPER BID BOND TO A MCCRAY MARINE CONSTRUCTION, INC., ADDRESS NOT SHOWN, DATED DECEMBER 14, 1966, FOR AN UNIDENTIFIED INVITATION FOR WHICH THE OPENING DATE WAS FIXED AS DECEMBER 14, 1966. FURTHER, IT IS IMPORTANT TO OBSERVE THAT THE LAST SENTENCE OF PARAGRAPH 6 OF THE UNDERTAKING PROVIDED THAT THE CONTRACTOR OR SURETY MAY CANCEL THE UNDERTAKING AT ANY TIME. EVEN IF THE UNDERTAKING COULD BE INTERPRETED AS GUARANTEEING THE EXISTENCE OF THE BID BOND ON OR PRIOR TO THE DAY OF BID OPENING, WE HAVE HELD THAT A LOW BIDDER WHOSE BID WAS NOT ACCOMPANIED BY THE REQUIRED BID BOND WHICH DID NOT ARRIVE UNTIL AFTER BID OPENING TIME BECAUSE OF INADVERTENCE MAY NOT ESTABLISH BY OTHER EVIDENCE THE EXISTENCE OF A BID GUARANTEE PRIOR TO BID OPENING. THE LOW BID IN THAT CASE WAS REJECTED AS NONRESPONSIVE TO THE INVITATION. 42 COMP. GEN. 725.

IN 38 COMP. GEN. 532, CITED BY YOU, WE HELD THAT IN ORDER TO PROTECT THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM AND TO GIVE ALL BIDDERS AN EQUAL OPPORTUNITY TO BID FOR GOVERNMENT BUSINESS, THE REQUIREMENT FOR FILING BID BONDS PRIOR TO BID OPENING WOULD NOT BE WAIVED THEREAFTER. THIS HOLDING AND OTHER RELATED DECISIONS HAVE REMAINED IN EFFECT AND HAVE BEEN SUBSTANTIALLY INCORPORATED INTO THE PROCUREMENT REGULATIONS.

IN 39 COMP. GEN. 60, ALSO CITED IN YOUR BRIEF, WE HELD THAT THE PURPOSE OF OUR DECISION AT 38 COMP. GEN. 532 WAS TO PRECLUDE THE CONSIDERATION FOR AWARD OF A BID WHICH IS NOT ACCOMPANIED BY A VALID BID BOND IN THE AMOUNT REQUIRED, UPON WHICH THE GOVERNMENT WOULD HAVE RECOURSE AGAINST THE SURETY IN THE EVENT THE BIDDER FAILS TO GO FORWARD WITH FAITHFUL PERFORMANCE OF THE CONTRACT. THE QUESTION PRESENTED IN THAT CASE, AS HERE, WAS WHETHER THE BID BOND FORM SUBMITTED COULD BE ENFORCED AGAINST THE SURETY IN THE EVENT AWARD WAS MADE TO THE LOW BIDDER AND THAT BIDDER REFUSED TO PROCEED FURTHER WITH PERFORMANCE. WE CITED AND QUOTED FROM 50 AM. JUR. SURETYSHIP, SECTION 155 (PAGE 1004) AS FOLLOWS:

"IF THE CHARACTER AND EXTENT OF THE SURETY'S LIABILITY ARE ASCERTAINABLE FROM AN INSPECTION OF THE WHOLE INSTRUMENT, NO MERELY TECHNICAL DEFECTS WILL BE ALLOWED TO STAND IN THE WAY OF ITS ENFORCEMENT. * * * EVEN THOUGH THE FORM OF A SURETY'S BOND IS EXPRESSLY DESCRIBED BY STATUTE, THE SURETY MAY NOT DEFEND ON THE GROUND THAT THERE WAS A FAILURE TO CONFORM WITH THE STATUTORY REQUIREMENTS, IF THERE WAS A SUBSTANTIAL COMPLIANCE THEREWITH AND IF THERE IS NO PREJUDICIAL VARIATION. * * *"

THE QUESTION IN THAT CASE WAS WHETHER THE BOND SUBMITTED BEARING THE WRONG DATE OF BID, AND SHOWING THAT THE DATE THE BOND WAS EXECUTED AS PRIOR IN TIME TO THE DATE OF THE BID, CONTRARY TO THE INSTRUCTIONS TO BIDDERS, WAS ACCEPTABLE AS BEING IDENTIFIABLE WITH THE BID AND PERMITTING UNQUESTIONED RECOURSE AGAINST THE SURETY SHOULD NEED ARISE. WE HELD THAT SUCH BOND WAS ACCEPTABLE UNDER THOSE CIRCUMSTANCES. THERE WAS NO QUESTION THERE AS TO WHETHER A BID BOND WAS ACTUALLY IN EXISTENCE OR HAD BEEN SUBMITTED. SUCH WAS NOT THE SITUATION IN THE INSTANT CASE.

WE HELD IN 38 COMP. GEN. 83 THAT THE BID BOND FORM SUBMITTED CONTAINED MATERIAL VARIATIONS FROM THE REQUIREMENTS OF THE INVITATION IN THAT THE DIFFERENCE BETWEEN THE GOVERNMENT'S STANDARD FORM 24 AND THE ONE FURNISHED BY THE LOW BIDDER ACTUALLY REPRESENTED A DIFFERENCE IN THE RIGHTS AND OBLIGATIONS OF THE PARTIES SINCE THE SUBMITTED BID BOND FORM CONTAINED A LIMITATION ON THE TIME WITHIN WHICH AN ACTION MUST BE BROUGHT AGAINST THE SURETY BY THE OBLIGEE. WE HELD THAT THE BID BOND FORM FAILED TO MEET A MATERIAL REQUIREMENT OF THE INVITATION.

THE BID GUARANTEE CONSIDERED IN OUR DECISION AT 41 COMP. GEN. 585, WAS A COMMERCIAL BOND OF AN INSURANCE COMPANY 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 BUT DID INDEMNIFY THE GOVERNMENT AGAINST THE BIDDER'S FAILURE TO ENTER INTO A CONTRACT WHICH WAS IN ACCORDANCE WITH ITS BID. BY TENDER OF STANDARD FORM 21 (CONSTRUCTION CONTRACT BID FORM), THE BIDDER AGREED TO GIVE PERFORMANCE AND PAYMENT BONDS UPON WRITTEN NOTICE THAT IT WAS THE SUCCESSFUL BIDDER. THERE THE BID BOND FORM USED WAS HELD TO PROVIDE THE GOVERNMENT WITH THE NECESSARY UNDERTAKING BY A SURETY.

IN SUMMARY, THE FAILURE TO UTILIZE THE DESIGNATED BOND FORM IS NOT, IN AND OF ITSELF, A SUFFICIENT BASIS TO REJECT AN OTHERWISE ACCEPTABLE BID. 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, WAS A TECHNICAL DEFICIENCY WHICH DID NOT MAKE THE BID UNACCEPTABLE. THE RATIONALE APPLIED IN 39 COMP. GEN. 60, THAT NOTWITHSTANDING A DEFICIENCY IN EXECUTION OF THE BOND FORM IF THE GOVERNMENT COULD ENFORCE THE BOND AGAINST THE SURETY IN THE EVENT THAT THE CONTRACTOR FAILED TO GO FORWARD WITH FAITHFUL PERFORMANCE, WAS ALSO APPLIED IN 41 COMP. GEN. 585 AS A BASIS FOR THE ACCEPTANCE OF THE BID BOND. HOWEVER, THESE CASES ARE DISTINGUISHABLE FROM THE INSTANT CASE, FOR IN THOSE CASES A BID BOND WAS IN FACT SUBMITTED WITH THE BID AS REQUIRED. HERE, A DOCUMENT PURPORTEDLY A BID BOND WAS TIMELY FILED BUT AFTER ITS AUTHENTICITY WAS QUESTIONED A PROPER BID BOND WAS FURNISHED AFTER BID OPENING. ASIDE FROM THE LATE DELIVERY OF THE PROPER BID BOND, WE FIND NO LEGAL BASIS TO RECOGNIZE THE BID BOND UNDERTAKING AS AN UNQUALIFIED INDEMNIFICATION AGREEMENT. A COMPARISON BETWEEN THE BID BOND SUBMITTED AFTER BID OPENING AND THE "SERVICE UNDERTAKING" REVEALS SUBSTANTIAL DEVIATIONS OF FORM WHICH DO NOT CONSTITUTE IT AS AN ACCEPTABLE SUBSTITUTE FOR THE USUAL BOND UNDERTAKING IMPOSED BY REGULATION. MOREOVER, IN VIEW OF THE INFORMATION CONTAINED ON THE "SERVICE UNDERTAKING," WHICH IS GENERAL IN NATURE, THE SURETY'S OBLIGATION TO THE GOVERNMENT ON THIS PARTICULAR INVITATION WOULD HAVE TO HAVE BEEN ESTABLISHED AFTER BID OPENING. IN SHORT, THE SUBMITTED FORM WAS NOT, IN OUR OPINION, A PROPER BID BOND IN THAT IT DID NOT AFFORD TO THE GOVERNMENT THE NECESSARY UNQUESTIONED RECOURSE AGAINST THE SURETY.

FOR THE FOREGOING REASONS, AND SINCE BIDDERS MAY NOT CURE A NONRESPONSIVE BID AFTER OPENING, WE FIND NO LEGAL BASIS FOR DISTURBING THE AWARD PROPERLY MADE TO THE SECOND LOW BIDDER. THEREFORE, YOUR PROTEST IS DENIED.