B-175696, JUN 12, 1972, 51 COMP GEN 802

B-175696: Jun 12, 1972

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IS A VALID BOND THAT BINDS THE SURETY IN THE AMOUNT OF $50. SINCE PURSUANT TO SECTION 1 10.103-4(B) OF THE FEDERAL PROCUREMENT REGULATIONS WHEN THE AMOUNT OF A BID GUARANTEE EQUALS OR IS GREATER THAN THE DIFFERENCE BETWEEN THE BID PRICE AND THE PRICE IN THE NEXT HIGHER ACCEPTABLE BID ($272. ALTHOUGH THE GENERAL RULE IS THAT AN AGENT WHO EXCEEDS HIS AUTHORITY MAY NOT BIND THE PRINCIPAL. WHERE THE DIFFERENCE BETWEEN THE CONTRACT AS AUTHORIZED AND THE CONTRACT AS MADE IS A DIFFERENCE IN AMOUNT. AN EXCEPTION IS RECOGNIZED AND THE PRINCIPAL IS LIABLE UPON THE CONTRACT AS IT WAS AUTHORIZED. A BID BOND AMOUNTING TO 20 PERCENT OF THE BID TOTAL WAS REQUIRED UNDER THE IFB. 757.90 WAS SUBMITTED BY MIDWESTERN PACIFIC (MPC).

B-175696, JUN 12, 1972, 51 COMP GEN 802

BONDS - BID - SUFFICIENCY A BID BOND SUBMITTED IN THE REQUIRED AMOUNT OF $52,351.58, WHICH CONSTITUTED 20 PERCENT OF THE BID TOTAL ($261,757.90), BUT AN ATTACHMENT TO THE BOND LIMITED THE SURETY'S OBLIGATION TO AN AMOUNT NOT TO EXCEED $50,000, IS A VALID BOND THAT BINDS THE SURETY IN THE AMOUNT OF $50,000, AND THE LOW BID MAY BE CONSIDERED, NOTWITHSTANDING THE BOND DID NOT EQUAL THE REQUIRED PENAL AMOUNT, SINCE PURSUANT TO SECTION 1 10.103-4(B) OF THE FEDERAL PROCUREMENT REGULATIONS WHEN THE AMOUNT OF A BID GUARANTEE EQUALS OR IS GREATER THAN THE DIFFERENCE BETWEEN THE BID PRICE AND THE PRICE IN THE NEXT HIGHER ACCEPTABLE BID ($272,956), THE FAILURE TO SUBMIT A SUFFICIENT BID GUARANTEE MAY BE WAIVED. ALTHOUGH THE GENERAL RULE IS THAT AN AGENT WHO EXCEEDS HIS AUTHORITY MAY NOT BIND THE PRINCIPAL, WHERE THE DIFFERENCE BETWEEN THE CONTRACT AS AUTHORIZED AND THE CONTRACT AS MADE IS A DIFFERENCE IN AMOUNT, AN EXCEPTION IS RECOGNIZED AND THE PRINCIPAL IS LIABLE UPON THE CONTRACT AS IT WAS AUTHORIZED. B-148309, MARCH 19, 1962, OVERRULED.

TO THE REGIONAL CONTRACTING OFFICER, UNITED STATES DEPARTMENT OF AGRICULTURE, JUNE 12, 1972:

WE REFER TO LETTER OF APRIL 4, 1972, YOUR REFERENCE 6320, REQUESTING A DECISION CONCERNING THE VALIDITY OF A BID BOND SUBMITTED BY MIDWESTERN PACIFIC CORPORATION (MPC) IN RESPONSE TO INVITATION FOR BIDS (IFB) NO. R9- 72-32, FOR ROAD AND BRIDGE CONSTRUCTION IN CHEQUAMEGON NATIONAL FOREST, WISCONSIN.

A BID BOND AMOUNTING TO 20 PERCENT OF THE BID TOTAL WAS REQUIRED UNDER THE IFB. THE LOW BID IN THE AMOUNT OF $261,757.90 WAS SUBMITTED BY MIDWESTERN PACIFIC (MPC); THE SECOND LOW BID IN THE AMOUNT OF $272,956 WAS SUBMITTED BY KOSHAK CONSTRUCTION CO., INC. (KOSHAK). INCLUDED WITH THE BID OF MPC WAS A BID GUARANTEE FROM THE SUMMIT INSURANCE COMPANY OF NEW YORK (SUMMIT) FOR 20 PERCENT OF THE BID AMOUNT, OR $52,351.58. HOWEVER, THE AUTHORITY OF SUMMIT'S ATTORNEY-IN FACT WAS LIMITED BY AN AGREEMENT ATTACHED TO THE BOND TO OBLIGATE THE SURETY TO AMOUNTS NOT TO EXCEED $50,000.

THE QUESTION PRESENTED FOR OUR CONSIDERATION IS WHETHER THE BOND IS VALID. IF THE BOND IS ENFORCEABLE IN THE PENAL SUM OF $50,000, THE FAILURE OF THE BOND TO EQUAL THE PENAL AMOUNT REQUIRED (IN THIS CASE $52,351.58) WOULD NOT REQUIRE REJECTION OF MPC'S BID. UNDER SECTION 1 10.103-4(B) OF THE FEDERAL PROCUREMENT REGULATIONS THE FAILURE OF A BIDDER TO SUBMIT A SUFFICIENT BID GUARANTEE MAY BE WAIVED WHERE, AS HERE, "THE AMOUNT OF THE BID GUARANTEE SUBMITTED, THOUGH LESS THAN THE AMOUNT REQUIRED BY THE INVITATION FOR BIDS, IS EQUAL TO OR GREATER THAN THE DIFFERENCE BETWEEN THE PRICE STATED IN THE BID AND THE PRICE STATED IN THE NEXT HIGHER ACCEPTABLE BID."

AS A GENERAL RULE, AN AGENT WHO EXCEEDS HIS POWERS IN MAKING AN UNAUTHORIZED CONTRACT DOES NOT BIND THE PRINCIPAL EITHER BY THE CONTRACT AS MADE OR AS IT WOULD HAVE BEEN MADE HAD THE AGENT ACTED IN ACCORDANCE WITH HIS AUTHORITY. HOWEVER, WHERE THE ONLY DIFFERENCE BETWEEN THE CONTRACT AS AUTHORIZED AND THE CONTRACT AS MADE IS A DIFFERENCE IN AMOUNT, AN EXCEPTION IS RECOGNIZED AND THE PRINCIPAL IS LIABLE UPON THE CONTRACT AS IT WAS AUTHORIZED. RESTATEMENT, SECOND, AGENCY SEC. 164; ALSO SEE POGUE V. BANK OF LAKE VILLAGE, 464 S.W. 2D.49 (1971); LACHMILLER V. LACHMILLER ENGINEERING COMPANY, 301 P.2D.288 (1956), AND CASES CITED THEREIN.

ACCORDINGLY, WE CONSIDER THE BID GUARANTEE SUBMITTED WITH MPC'S BID TO BE VALID AND TO OBLIGATE SUMMIT IN THE AMOUNT OF $50,000. OUR DECISION B- 148309, MARCH 19, 1962, TO THE CONTRARY, IS OVERRULED.