B-247646, May 12, 1992

B-247646: May 12, 1992

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New England Systems's bid was also rejected because it submitted a bid bond expressly conditioned as follows. "Availability of final bonding is conditioned upon acceptance of annual bonds (see letter from surety attached to bond).". The attached surety letter stated: "The bid bond accompanying New England Systems & Controls' proposal is offered by National Grange Mutual Insurance Company with the expressed condition that final bonds/performance and payment bonds can be issued on an annual basis with renewal/continuation at the option of the Surety.". The protester explained that the condition in its bid bond was inserted "on the advice of our surety agent who had previously dealt with the Government" and argued that any defect resulting from insertion of this condition should be considered a minor informality or irregularity.

B-247646, May 12, 1992

PROCUREMENT - Sealed Bidding - Bid guarantees - Responsiveness - Sureties - Liability restrictions DIGEST: Contracting agency properly rejected protester's bid as nonresponsive where protester submitted a bid bond containing certain conditions impermissibly limiting the liability of the protester and its surety. Protester may not cure defective bid by offering a substitute bond after bid opening.

Attorneys

New England Systems and Controls, Inc.:

New England Systems and Controls, Inc. protests the rejection of its bid as nonresponsive under invitation for bids (IFB) No GS-01P-91-BWC 0159, issued by the General Services Administration, for mechanical maintenance services for a 3-year term at three federal facilities.

We deny the protest.

The solicitation, issued on November 12, 1991, required each bidder to submit with its bid a bid guarantee in an amount equal to 20 percent of the bid price for the term of the contract. The solicitation also required the successful bidder to submit a performance bond in an amount equal to 20 percent of the contract price for the term of the contract.

Of the seven bids received by bid opening, the contracting officer rejected the low bid as nonresponsive for failure to furnish the required bid guarantee. New England Systems's bid was also rejected because it submitted a bid bond expressly conditioned as follows. "Availability of final bonding is conditioned upon acceptance of annual bonds (see letter from surety attached to bond)." The attached surety letter stated:

"The bid bond accompanying New England Systems & Controls' proposal is offered by National Grange Mutual Insurance Company with the expressed condition that final bonds/performance and payment bonds can be issued on an annual basis with renewal/continuation at the option of the Surety."

Following bid opening, the protester explained that the condition in its bid bond was inserted "on the advice of our surety agent who had previously dealt with the Government" and argued that any defect resulting from insertion of this condition should be considered a minor informality or irregularity, which did not require rejection of its bid. After bid opening, the protester also furnished a letter from its bonding agent asserting that the surety would be willing to remove the conditions originally imposed.

A bid guarantee is a form of security submitted to assure the government that a successful bidder will not withdraw its bid within the period specified for acceptance and, if required, will execute a written contract and furnish performance and payment bonds. See Federal Acquisition Regulation (FAR) Sec. 28.001; Allen County Bldgs. Supply, 64 Comp.Gen. 505 (1985), 85-1 CPD Para. 507. A bid bond is a material part of a bid which must be furnished when the bid is submitted, Curry Envtl. Serv., Inc., B-228214, Dec. 9, 1987, 87-2 CPD Para. 570, and the sufficiency of the bid bond depends on whether the surety is clearly bound by its terms; when the liability of the surety is not clear, the bond should properly be regarded as defective. See Allen County Bldgs. Supply, supra.

We have held that conditions inserted in a bid bond render the bond defective since they materially limit the liability of the bidder and its surety. Environmental Management Servs., Inc., B-244784, Aug. 26, 1991, 91-2 CPD Para. 198. When a bidder furnishes a defective bond, the bid itself is rendered defective and must be rejected as nonresponsive. FAR Sec. 28.101-4. Here, the bid bond was expressly conditioned upon issuance of performance and payment bonds, and the surety specifically reserved the option after the first year regarding whether it would issue the performance and payment bonds. Accordingly, the liability of the bidder and its surety was materially limited. Further, the determination as to whether a bid and the accompanying bond is acceptable must be based solely on the documents as they appear at the time of bid opening. Building Sys. Contractors, Inc., B-219416, July 9, 1985, 85-2 CPD Para. 36. The fact that New England Systems may have provided a substitute bid bond after bid opening does not make its bid acceptable. Id. Accordingly, the contracting officer properly rejected New England Systems' bid as nonresponsive.

The protest is denied.

Honorable Jack Reed Member, United States House of Representatives

This responds to your letter dated February 24, 1992, concerning the protest filed by New England Systems and Controls, Inc., regarding solicitation No. DS-01P-91-BWC-0159, issued by the General Services Administration. By decision of today, copy enclosed, we have denied the protest.