B-181692, OCT 8, 1974, 54 COMP GEN 271

B-181692: Oct 8, 1974

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SINCE INVITATION FOR BIDS REQUIREMENT FOR ACCEPTABLE BID BOND IS MATERIAL AND GENERAL ACCOUNTING OFFICE IS UNABLE TO CONCLUDE ON BASIS OF INFORMATION BIDDER SUBMITTED WITH BID THAT SURETY WOULD BE BOUND IN EVENT BIDDER FAILED TO EXECUTE CONTRACT UPON ACCEPTANCE OF ITS BID. PARAGRAPH 4 OF SF-22 STATES IN PERTINENT PART: WHERE A BID GUARANTEE IS REQUIRED BY THE INVITATION FOR BIDS. THE APPARENT LOW BID WAS SUBMITTED BY THE A.D. THE BID FORM THE BIDDER IS IDENTIFIED AS THE "A.D. THE BID IS SIGNED BY "J.E. THE WORDS "JOINT VENTURE" ARE CHECKED IN A SPACE ENTITLED "TYPE OF ORGANIZATION" APPEARING IN THE UPPER RIGHT HAND CORNER OF THE FACE OF THE BID BOND. THE PROCURING ACTIVITY DETERMINED THAT "ROE'S BID WAS NONRESPONSIVE.

B-181692, OCT 8, 1974, 54 COMP GEN 271

BONDS - BID - DISCREPANCY BETWEEN BID AND BID BOND - BID NONRESPONSIVE BID OF CORPORATION, WHICH SUBMITTED DEFECTIVE BID BOND IN NAME OF JOINT VENTURE CONSISTING OF CORPORATION AND TWO INDIVIDUALS, MUST BE REJECTED AS NONRESPONSIVE AND DEFECT CANNOT BE WAIVED BY CONTRACTING OFFICER, SINCE INVITATION FOR BIDS REQUIREMENT FOR ACCEPTABLE BID BOND IS MATERIAL AND GENERAL ACCOUNTING OFFICE IS UNABLE TO CONCLUDE ON BASIS OF INFORMATION BIDDER SUBMITTED WITH BID THAT SURETY WOULD BE BOUND IN EVENT BIDDER FAILED TO EXECUTE CONTRACT UPON ACCEPTANCE OF ITS BID. AGENTS - GOVERNMENT - AUTHORITY - CONTRACT MATTERS CONTRACTING PERSONNEL'S ERRONEOUS ADVICE THAT BIDDER WOULD RECEIVE AWARD CANNOT ESTOP GOVERNMENT'S REJECTION OF NONRESPONSIVE BID.

IN THE MATTER OF A.D. ROE COMPANY, INC., OCTOBER 8, 1974:

ON MAY 8, 1974, THE UNITED STATES ARMY CORPS OF ENGINEERS, BALTIMORE DISTRICT, BALTIMORE, MARYLAND, ISSUED INVITATION FOR BIDS (IFB) NO. DACA31 -74-B-0087 FOR THE MODERNIZATION OF BARRACKS AT FORT KNOX, KENTUCKY. THE IFB INCLUDED STANDARD FORMS (SF) 20 AND 22. PARAGRAPH 4 OF SF-22 STATES IN PERTINENT PART:

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.

PARAGRAPH A OF SF-20 STATES IN PERTINENT PART:

EACH BIDDER SHALL SUBMIT WITH HIS BID A BID BOND (STANDARD FORM 24) WITH GOOD AND SUFFICIENT SURETY OR SURETIES ACCEPTABLE TO THE GOVERNMENT ***.

THE APPARENT LOW BID WAS SUBMITTED BY THE A.D. ROE COMPANY, INC. (ROE). HOWEVER, ROE IDENTIFIED ITSELF DIFFERENTLY ON ITS BID BOND (SF 24). THE BID FORM THE BIDDER IS IDENTIFIED AS THE "A.D. ROE COMPANY, INC." AND THE BID IS SIGNED BY "J.E. MCCUBBIN, JR.," VICE PRESIDENT. IN ADDITION, ROE IDENTIFIES ITSELF ON SF-19-B, "REPRESENTATION AND CERTIFICATIONS," AS THE "A.D. ROE COMPANY, INC.," A CORPORATION INCORPORATED IN THE STATE OF KENTUCKY.

THE BID BOND IDENTIFIES ITS PRINCIPAL AS THE "A.D. ROE COMPANY, INC. AND A.D. ROE AND JAMES E. MCCUBBIN, JR. (A JOINT VENTURE)." IN THE SIGNATURE BLOCKS FOR THE PRINCIPAL OF THE BID BOND APPEAR THE SIGNATURES OF "A.D. ROE" AS PRESIDENT OF THE A.D. ROE COMPANY, INC., "A.D. ROE," INDIVIDUAL AND "JAMES E. MCCUBBIN, JR.," INDIVIDUAL. ALSO, THE WORDS "JOINT VENTURE" ARE CHECKED IN A SPACE ENTITLED "TYPE OF ORGANIZATION" APPEARING IN THE UPPER RIGHT HAND CORNER OF THE FACE OF THE BID BOND.

CONSEQUENTLY, THE PROCURING ACTIVITY DETERMINED THAT "ROE'S BID WAS NONRESPONSIVE, SINCE THERE WAS A DISCREPANCY BETWEEN THE LEGAL ENTITY SHOW ON THE BID AND THE LEGAL ENTITY SHOWN ON THE BID BOND. AWARD WAS MADE ON JUNE 27, 1974, TO THE ONLY OTHER BIDDER UNDER THE IFB, CAL CONSTRUCTORS, A JOINT VENTURE CONSISTING OF SANTA FE ENGINEERS, INC., EXCAVATION CONSTRUCTION COMPANY, AND LAN CAL EQUIPMENT CO., INC., IN THE AMOUNT $6,532,529. ROE'S BID FOR THIS SAME WORK WAS $6,162,300.

BY LETTER DATED JULY 2, 1974, ROE PROTESTED TO OUR OFFICE AGAINST THE REJECTION OF ITS BID. ROE CONTENDS THAT THE CLERICAL ERROR ON THE BID BOND SHOULD NOT RENDER ITS BID NONRESPONSIVE AND IT SHOULD HAVE BEEN GIVEN THE OPPORTUNITY TO CORRECT THIS SIMPLE MISTAKE. ROE STATES THAT THE BID BOND CLEARLY COVERED ROE AS A BIDDER UNDER THE IFB, AS HAS BEEN UNEQUIVOCABLY RECOGNIZED BY THE SURETY IN A LETTER TO THE PROCURING ACTIVITY DATED JULY 1, 1974. ROE CONCLUDES THAT THE REJECTION OF ITS BID FOR SUCH "GROSSLY INEQUITABLE AND LUDICROUS" REASONS CONSTITUTED AN ARBITRARY AND CAPRICIOUS ACT ON THE PART OF THE ARMY, WHICH WILL COST THE GOVERNMENT ALMOST $400,000 MORE THAN IF AWARD HAD BEEN MADE TO ROE.

IT IS CLEAR THAT IN ORDER FOR A BID TO BE CONSIDERED RESPONSIVE TO AN IFB, IT MUST COMPLY WITH ALL OF THE IFB'S MATERIAL REQUIREMENTS. 52 COMP. GEN. 265 (1972). IT ALSO IS A FUNDAMENTAL PRINCIPLE OF PROCUREMENT LAW THAT WHETHER A BID IS RESPONSIVE TO THE IFB IS FOR DETERMINATION UPON THE BASIS OF THE BID AS SUBMITTED AND THAT IT IS NOT PROPER TO CONSIDER THE REASONS FOR THE NONRESPONSIVENESS, WHETHER DUE TO MISTAKE OR OTHERWISE. 38 COMP. GEN. 819 (1959); 51 ID. 836 (1972). MOREOVER, IT IS EQUALLY WELL -SETTLED THAT DEFECTS WHICH MAKE A BID NONRESPONSIVE MAY NOT BE WAIVED BY THE CONTRACTING OFFICER. 30 COMP. GEN. 179 (1950); 50 ID. 733 (1971).

BEGINNING WITH OUR DECISION IN 38 COMP. GEN. 532 (1959), WE HAVE CONSISTENTLY HELD THAT THE BID BOND REQUIREMENTS MUST BE CONSIDERED A MATERIAL PART OF THE IFB AND THE CONTRACTING OFFICER CANNOT WAIVE THE FAILURE TO COMPLY WITH THESE REQUIREMENTS. SEE E.G., 39 COMP. GEN. 60 (1959); 44 ID. 495 (1965); 50 ID. 530 (1971); 52 ID. 223 (1972). SUMMARIZED THE BASIS FOR THIS RULE AT PAGE 536 OF 38 COMP. GEN., SUPRA, AS FOLLOWS:

*** WAIVER OF A BID BOND REQUIREMENT STATED IN AN INVITATION FOR BIDS WOULD HAVE A TENDENCY TO COMPROMISE THE INTEGRITY OF THE COMPETITIVE BID SYSTEM BY (1) MAKING IT POSSIBLE FOR A BIDDER TO DECIDE AFTER OPENING WHETHER OR NOT TO TRY TO HAVE HIS BID REJECTED, (2) CAUSING UNDUE DELAY IN EFFECTING PROCUREMENTS, AND (3) CREATING, BY THE NECESSARY SUBJECTIVE DETERMINATIONS BY DIFFERENT CONTRACTING OFFICERS, INCONSISTENCIES IN THE TREATMENT OF BIDDERS. THE NET EFFECT OF THE FOREGOING WOULD BE DETRIMENTAL TO FULLY RESPONSIVE AND RESPONSIBLE BIDDERS, AND COULD TEND TO DRIVE THEM OUT OF COMPETITION IN THOSE AREAS WHERE THE PRACTICES DESCRIBED OCCUR. THIS RESULT COULD HARDLY BE SAID TO SERVE THE BEST INTERESTS OF THE UNITED STATES. ***

OUR OFFICE WAS NOT ALONE IN THE VIEW THAT WAIVER OF THE MATERIAL BID BOND REQUIREMENTS TENDED TO COMPROMISE THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM. PRIOR TO OUR DECISION, A CONGRESSIONAL COMMITTEE EXPRESSED GRAVE CONCERN OVER THE FREQUENT WAIVER OF THE REQUIREMENTS FOR ACCEPTABLE BID BONDS. SEE PROCUREMENT SUBCOMMITTEE OF THE HOUSE COMMITTEE ON ARMED SERVICES, 82D CONGRESS, INVESTIGATION OF BID BONDS, (COMM. PRINT. 1951), WHEREIN IT WAS STATED THAT THE THEN-EXISTING REGULATIONS ALLOWING WAIVER OF THE BID BOND REQUIREMENTS HAD NO JUSTIFICATION IN LAW AND SHOULD BE CHANGED.

FURTHERMORE, ARMED SERVICES PROCUREMENT REGULATION (ASPR) 10-102.5 RECOGNIZE THE MATERIALITY OF THE BID BOND REQUIREMENTS. THIS REGULATION STATES IN PERTINENT PART:

WHEN A SOLICITATION REQUIRES THAT BIDS BE SUPPORTED BY A BID GUARANTEE, NONCOMPLIANCE WITH SUCH REQUIREMENT WILL REQUIRE REJECTION OF THE BID ***.

ASPR 10-102.5 DOES STATE CERTAIN SPECIFIED EXCEPTIONS TO THIS GENERAL RULE. HOWEVER, NONE OF THESE STATED EXCEPTIONS ARE APPLICABLE TO THE PRESENT CASE NOR DO ANY OF THESE EXCEPTIONS PERMIT THE POSSIBILITY OF ATTEMPTS BY BIDDERS TO LEAVE THEMSELVES THE OPTION OF REFUSING THE CONTRACT WITH NO EFFECTIVE SECURITY FOR THE GOVERNMENT OR OF CORRECTING THE DEFECTIVE SECURITIES IN ORDER TO RECEIVE THE AWARD. SEE 39 COMP. GEN. 796 (1960).

WE HAVE CONSISTENTLY HELD THAT A BID BOND WHICH NAMES A PRINCIPAL DIFFERENT FROM THE NOMINAL BIDDER IS DEFICIENT AND THE DEFECT MAY NOT BE WAIVED AS A MINOR INFORMALITY. 44 COMP. GEN., SUPRA; 51 COMP. GEN. SUPRA; 52 COMP. GEN 223 SUPRA; B-177890, APRIL 4, 1973; B-178796, AUGUST 8, 1973. THIS RULE IS PROMPTED BY THE RULE OF SURETYSHIP THAT NO ONE INCURS A LIABILITY TO PAY THE DEBTS OR PERFORM THE DUTY OF ANOTHER UNLESS HE EXPRESSLY AGREES TO BE BOUND. SEE 72 C.J.S. PRINCIPAL AND SURETY, SEC. 91 (1951). CF. SECTION 4.14, STEARNS LAW OF SURETYSHIP (5TH ED., 1951). THIS REGARD, ANNOT., 144 A.L.R. 1263, 1267 (1943) STATES:

EVEN ASIDE FROM THE GENERAL DOCTRINE THAT A SURETY'S LIABILITY IS STRICTISSIMI JURIS AND CANNOT BE EXTENDED BY CONSTRUCTION, THERE SEEMS TO BE NO ESCAPE FROM THE PROPOSITION THAT A SURETY WHO UNDERTAKES TO RESPOND IN RESPECT OF THE ACTS OF ONE PRINCIPAL CANNOT BE HELD LIABLE IN RESPECT OF THE ACTS OF ANOTHER, OR OF THE PRINCIPAL AND ANOTHER ACTING WITH HIM AS PRINCIPAL; FOR SO TO EXTEND HIS LIABILITY WOULD BE TO HOLD HIM TO AN ESSENTIALLY DIFFERENT CONTRACT. CLEARLY, THE IDENTITY OF THE PRINCIPAL IS LINKED TO THE IDENTITY OF THE CONTRACT. ***

FURTHERMORE, IT HAS BEEN HELD THAT A SURETY UNDER A BOND IN THE NAME OF SEVERAL PRINCIPALS IS NOT LIABLE FOR THE DEFAULT OF ONE OF THEM. SEE 72 C.J.S. SUPRA; DOLESE BROTHERS COMPANY V. CHANEY & RICHARD, 145 P. 1119 (1915); OKLAHOMA PORTLAND CEMENT COMPANY V. CHANEY, 150 P. 884 (1915); SHUTTEE V. COALGATE GRAIN COMPANY, 172 P. 780 (1918); WILSON MACHINERY & SUPPLY COMPANY V. FIDELITY & CASUALTY COMPANY OF NEW YORK, 110 S.W. 2D 1075 (1937).

THE DETERMINATION OF THE SUFFICIENCY OF A BID BOND RELATES TO WHETHER THE GOVERNMENT WILL RECEIVE THE FULL AND COMPLETE PROTECTION IT CONTEMPLATED IN THE EVENT THE BIDDER FAILS TO EXECUTE THE REQUIRED CONTRACT DOCUMENTS AND DELIVER THE REQUIRED PERFORMANCE AND PAYMENT BONDS. SEE 39 COMP. GEN. 60; 52 ID. 223, SUPRA. IN THE PRESENT CASE, THE SURETY'S LIABILITY UNDER THE BOND IS CONTINGENT UPON THE BID BEING IN THE NAME OF THE ENTITY LISTED ON THE BID BOND, I.E., "A.D. ROE COMPANY, INC. AND A.D. ROE AND JAMES E. MCCUBBIN, JR., A JOINT VENTURE." THEREFORE, WE ARE UNABLE TO CONCLUDE ON THE BASIS OF THE INFORMATION ROE SUBMITTED WITH ITS BID THAT THE SURETY WOULD BE BOUND IN THE EVENT OF THE FAILURE OF ROE TO EXECUTE THE CONTRACT UPON ACCEPTANCE OF ITS BID. SEE B-170361, JULY 27, 1970; 50 COMP. GEN. 530, 534; 51 COMP. GEN., SUPRA; B-177890, SUPRA; B-178796, SUPRA. ROE CANNOT BE EXCEPTED FROM THE BID BOND REQUIREMENTS BY VIRTUE OF THE FACT THAT IT IS A PROVEN RESPONSIBLE CONTRACTOR, SINCE ALL BIDDERS MUST MEET THE MATERIAL REQUIREMENTS OF THE IFB IN ORDER FOR IT TO BE SAID THAT THEY ARE COMPETING ON AN EQUAL BASIS. SEE 52 COMP. GEN. 265.

ROE ALSO ARGUES THAT UNDER SURETYSHIP LAW THE TERMS OF THE CONTRACT OF WHICH THE SURETY PROMISES PERFORMANCE MUST BE READ INTO THE SURETY'S CONTRACT WITH THE PRINCIPAL, I.E., THE BOND, AND THAT THE TWO CONTRACTS MUST BE CONSTRUED TOGETHER AS ONE INSTRUMENT. ROE STATES THAT, THEREFORE, THE BID FORM (SF-21) AND THE BID BOND (SF-24) MUST BE CONSTRUED TOGETHER AS THE SURETYSHIP CONTRACT, WHICH UNDER THE CIRCUMSTANCES OF THE PRESENT CASE MUST BE CONSIDERED AMBIGUOUS. ROE GOES ON TO ARGUE THAT INASMUCH AS UNDER SURETYSHIP LAW RECOURSE MAY BE HAD TO EXTRANEOUS EVIDENCE IN ORDER TO RESOLVE ANY UNCERTAINTY AS TO THE INTENT OF THE PARTIES UNDER THE SURETYSHIP CONTRACT, IT IS CLEAR FROM THE PROMPT AFFIRMATIONS OF ROE AND ITS SURETY THAT THE PARTIES INTENDED TO RECOGNIZE THE "A.D. ROE COMPANY, INC." AS THE BIDDER/PRINCIPAL, AND THAT THE INCLUSION OF THE OTHER PARTIES ON THE BID BOND WAS A MERE CLERICAL ERROR.

ASSUMING ARGUENDO THAT ROE'S STATEMENT AND APPLICATION OF THE LAW OF SURETYSHIP IS CORRECT, IT STILL MUST BE CONCLUDED THAT ROE'S BID AS SUBMITTED IS, AT BEST, AMBIGUOUS. BY READING THE BID AND BID BOND TOGETHER, WE HAVE FOUND BIDS TO BE RESPONSIVE, EVEN THOUGH THEY NAMED DIFFERENT PRINCIPALS ON THE BONDS THAN THOSE NAMED ON THE BID FORMS, IN CASES WHERE WE WERE ABLE TO CONCLUDE FROM THE BID ITSELF THAT THE INTENDED BIDDER WAS THE SAME LEGAL ENTITY AS THE PRINCIPAL NAMED ON THE BID BOND. SEE B-169369, APRIL 7, 1970; B-176321, AUGUST 25, 1972. HOWEVER, IT IS WELL-SETTLED THAT AN AMBIGUOUS BID MAY NOT BE EXPLAINED AFTER BID OPENING WITH EXTRANEOUS EVIDENCE IN ORDER TO MAKE IT RESPONSIVE TO THE IFB'S REQUIREMENTS, SINCE THE BIDDER WOULD THEN, IN EFFECT, HAVE AN ELECTION AS TO WHETHER OR NOT HE WISHED TO HAVE HIS BID CONSIDERED. 40 COMP. GEN. 393 (1961); 50 ID. 302 (1970); ID. 379 (1970). THEREFORE, THE SURETY'S LETTER TO THE PROCURING ACTIVITY REGARDING ITS OBLIGATION ON THE BID BOND AND ANY OTHER EVIDENCE SUBMITTED AFTER BID OPENING CANNOT BE CONSIDERED IN DETERMINING WHETHER ROE'S BID IS RESPONSIVE. SEE 44 COMP. GEN. SUPRA; 51 COMP. GEN. SUPRA.

ROE ALSO CONTENDS THAT SINCE THE STATEMENT USED IN THE IFB'S BID GUARANTEE REQUIREMENT (SF-22, PARAGRAPH 4) WAS ONLY THAT FAILURE TO COMPLY "MAY BE CAUSE FOR REJECTION OF THE BID," ROE'S BID SHOULD NOT HAVE BEEN REJECTED IN VIEW OF THE COST SAVINGS TO THE GOVERNMENT AND THE OTHER CIRCUMSTANCES SURROUNDING THIS PROCUREMENT SET OUT ABOVE. HOWEVER, WE HAVE HELD THAT THIS STATEMENT IS JUST AS COMPELLING AND MATERIAL AS IF MORE POSITIVE LANGUAGE WERE EMPLOYED. SEE 46 COMP. GEN. 11 (1966); B- 160507, DECEMBER 27, 1966; B-179107, OCTOBER 26, 1973; MATTER OF THORPE'S MOWING, B-181154, JULY 17, 1974. MOREOVER, PARAGRAPH A OF SF-20, WHICH WAS INCORPORATED IN THE IFB, STATED: "EACH BIDDER SHALL SUBMIT WITH HIS BID A BID BOND ***"

ROE FURTHER CONTENDS THAT THE ARMY HAD ESSENTIALLY WAIVED ITS RIGHT TO DETERMINE THAT ROE'S BID WAS NONRESPONSIVE BY VIRTUE OF THE REPEATED ASSURANCES MADE TO ROE, ON WHICH ROE AND ITS SUBCONTRACTORS RELIED TO THEIR DETRIMENT, BY VARIOUS CONTRACTING PERSONNEL, AFTER BID OPENING UP UNTIL ROE'S BID WAS REJECTED, THAT ROE WOULD RECEIVE THE CONTRACT. HOWEVER, THE BID GUARANTEE REQUIREMENTS HAVE THE FORCE AND EFFECT OF LAW, SINCE THEY WERE PROMULGATED BY THE DEPARTMENT OF DEFENSE IN IMPLEMENTATION OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, AND ARE PUBLISHED IN THE FEDERAL REGISTER. SEE PAUL V. UNITED STATES, 371 U.S. 245 (1963). THEREFORE, THE ARMY WAS LEGALLY BOUND TO REJECT ROE'S BID AS NONRESPONSIVE. IT IS WELL-ESTABLISHED THAT THE UNITED STATES IS NOT LIABLE FOR THE ERRONEOUS ACTS OR ADVICE OF ITS OFFICERS, AGENTS OR EMPLOYEES, EVEN IF COMMITTED IN THE PERFORMANCE OF THEIR OFFICIAL DUTIES. SEE HART V. UNITED STATES, 95 U.S. 316, 318 (1877); FEDERAL CROP INSURANCE CORPORATION V. MERRILL, 332 U.S. 380 (1947); 19 COMP. GEN. 503 (1939); 46 ID. 348 (1966). THEREFORE, IT IS CLEAR THAT THE ERRONEOUS ADVICE GIVEN BY ARMY CONTRACTING PERSONNEL CANNOT ACT TO ESTOP THE ARMY FROM REJECTING ROE'S BID AS NONRESPONSIVE AS IT WAS REQUIRED TO DO BY LAW. SEE PRESTEX INC. V. UNITED STATES, 320 F.2D 367 (1963). FINALLY, ALTHOUGH ACCEPTANCE OF ROE'S BID MAY RESULT IN A MONETARY SAVINGS TO THE GOVERNMENT ON THIS PROCUREMENT, WE HAVE OFTEN OBSERVED THAT THE MAINTENANCE OF THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM IS MORE IN THE GOVERNMENT'S BEST INTEREST THAN THE PECUNIARY ADVANTAGE TO BE GAINED IN A PARTICULAR CASE. SEE 43 COMP. GEN. 268 (1963); B-175420, MAY 22, 1972.

WE HAVE REVIEWED ALL OF THE CONTENTIONS, CASES AND AUTHORITIES CITED BY ROE AND ITS ATTORNEYS, BUT DO NOT FIND THEM PERSUASIVE OR APPLICABLE UNDER THE CIRCUMSTANCES OF THE PRESENT CASE. ACCORDINGLY, ROE'S PROTEST AGAINST THE REJECTION OF ITS BID IS DENIED.