B-234682, Jul 3, 1989, 68 Comp.Gen. 529

B-234682: Jul 3, 1989

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Procurement - Contractor - Qualification - Responsibility/responsiveness distinctions - Sureties - Financial capacity Individual sureties improperly were found to lack inadequate net worths. As a result low bidder improperly was rejected as nonresponsible. There is no general prohibition against sureties pledging their personal residences under a bid guarantee. Romac argues it was improperly rejected as nonresponsible based on a finding that the individual sureties on its bid guarantee were unacceptable. The IFB required sureties to have net worths at least equal to the penal amount of the guarantee ($96. Concluded that both sureties were unacceptable because their principal assets were their personal residences.

B-234682, Jul 3, 1989, 68 Comp.Gen. 529

Procurement - Contractor - Qualification - Responsibility/responsiveness distinctions - Sureties - Financial capacity Individual sureties improperly were found to lack inadequate net worths, and as a result low bidder improperly was rejected as nonresponsible, where agency failed to include sureties' personal residences as assets in net worth calculation; there is no general prohibition against sureties pledging their personal residences under a bid guarantee, and agency did not establish any basis for disregarding personal residences in this case.

Romac Building Services, Inc.:

Romac Building Services, Inc., protests the rejection of its bid under invitation for bids (IFB) No. GS-02-PPB-SS-089-S036, issued by the General Services Administration (GSA), for the complete janitorial services at federal buildings No. 80, 111, and 178 at JFK Airport, Jamaica, New York. Romac argues it was improperly rejected as nonresponsible based on a finding that the individual sureties on its bid guarantee were unacceptable.

We sustain the protest.

Romac submitted the low bid, with an evaluated price of $1,513,200 (for 1 year plus 2 option years) and Prompt Maintenance Services, Inc., submitted the second low bid of $1,789,197. As the IFB required each bidder to provide a bid guarantee in an amount equal to 20 percent of the first year bid amount, Romac submitted a guarantee, naming two individual sureties, in the amount of $96,000. The IFB required sureties to have net worths at least equal to the penal amount of the guarantee ($96,000), and completed Affidavits of Individual Surety (Standard Form 28) setting forth the information on each surety's net worth.

One of Romac's proposed sureties, Mr. Latham, listed his net worth as $278,000, including a fair market value of $200,000 for his personal residence in New York, subject to a $70,000 mortgage. Romac's other surety, Mr. Bertuglia, listed his net worth as $1,280,000, including a claimed $535,000 in equity in his personal residence in New York, with a fair market value of $565,000 and subject to a mortgage totaling $30,000.

During the pre-award survey, GSA initially found Romac's financial condition to be unsatisfactory, but ultimately found Romac acceptable in this regard. GSA also reviewed the net worths of the individual sureties, however, and concluded that both sureties were unacceptable because their principal assets were their personal residences; it is the contracting officer's view that a personal residence is not a readily marketable asset, and thus could not be included as part of the sureties' net worth for purposes of determining acceptability. Since Mr. Latham lacked sufficient other assets to meet the $96,000 minimum, and Mr. Bertuglia's other listed assets also were questioned, the contracting officer found both sureties unacceptable, and rejected Romac as a nonresponsible bidder. On the same day, the contract was awarded to the second low bidder, Prompt Maintenance. Romac then filed a protest with our Office. The agency, in accordance with 4 C.F.R. Sec. 21.4(a)(2) (1988), has determined that urgent and compelling circumstances exist that require continued performance of the contract pending our decision.

Romac argues that GSA should have considered the sureties' equity in their personal residences in determining their net worth acceptability; this factor alone would be sufficient to render both individuals acceptable since both have equity in excess of $96,000. We agree with Romac.

We are aware of no general prohibition against individual sureties pledging their personal residences in support of a bid guarantee; indeed, we have decided numerous cases in which individual sureties' principal assets were their personal residences. J J Eng'g, Inc., B-233463.2, Feb. 13, 1989, 89-1 CPD Para. 147; see American Constr., B-213199, July 24, 1984, 84-2 CPD Para. 95. GSA has not endeavored to explain why the sureties' residences should not be considered in this case. Rather, GSA concludes without explanation that the individuals' residences are not readily marketable, and mischaracterizes them as "personal property" rather than as real property. We note that Standard Form 28, in providing for the listing of the "fair market value of solely-owned real estate," does not specifically preclude personal residences.

Standard Form 28 does advise individual sureties to exclude property "exempt from execution and sale for any reason including homestead exemption." This exemption protects a personal residence from sale to satisfy certain debts, but under New York law only $10,000 of a debtor's equity in his personal residence is exempt from the satisfaction of a money judgment. N.Y. Civ. Prac. Law and Rules Sec. 5206(a). Subtracting $10,000 from each surety's equity here leaves both with net worths exceeding the $96,000 penal amount.

We conclude that the personal residences of the individual sureties here should have been included as assets for the purpose of determining the sureties' net worths. As both sureties have adequate net worth based solely on their personal residences, the sureties were acceptable and Romac should not have been rejected as nonresponsible on the basis that they were not.

By letter of today to the Administrator, we are recommending that GSA terminate Prompt Maintenance's contract for the convenience of the government and award a contract to Romac. In addition, we find Romac entitled to recover its costs of filing and pursuing the protest, including attorneys' fees. 4 C.F.R. Sec. 21.6(d).

The protest is sustained.