B-140624, NOV. 23, 1959

B-140624, NOV. 23, 1959

TO SAMUEL F. SCHWAG, ESQUIRE:

FURTHER REFERENCE IS MADE TO YOUR LETTERS OF AUGUST 28, 1959, WITH ENCLOSURES, AND SEPTEMBER 11, 1959, PROTESTING ON BEHALF OF CHERUBINO PETTI AND CO., INC., THE REJECTION OF THAT FIRM'S LOW BID SUBMITTED PURSUANT TO INVITATION NO. QM (CTM) 36-243-59-858 ISSUED JUNE 10, 1959, FOR THE MANUFACTURE OF 43,875 MEN'S GREEN WOOL KERSEY COATS.

BIDS WERE OPENED ON JULY 8, 1959, IN ACCORDANCE WITH THE TERMS OF THE INVITATION, AS AMENDED. THE LOW BID, EXCEPT FOR ONE WHICH WAS NOT FOR CONSIDERATION, WAS SUBMITTED BY PETTI ON AN "ALL OR NONE" BASIS AT A TOTAL PRICE OF $901,836 ACCOMPANIED BY A BID BOND IN THE PENAL SUM OF $438,000. THE BID WAS SUBSEQUENTLY RAISED BY TELEGRAM TO $956,679.75. THERE WAS, HOWEVER, NO INCREASE IN THE PENAL SUM OF THE BID BOND.

WITH RESPECT TO THE NECESSITY FOR THE SUBMISSION OF A BID BOND THE INVITATION PROVIDED:

"F. BID BOND (APPLICABLE TO INVITATION AND BIDS ONLY): EACH BIDDER MUST SUBMIT WITH ITS BID A BOND, IN DUPLICATE, ON STANDARD FORM 24, PROPERLY EXECUTED BY ITSELF AND AN ACCEPTABLE SURETY OBLIGATING THE BIDDER IN A PENAL SUM EQUAL TO 100 PERCENT OF THE TOTAL BID PRICE LESS THE VALUE OF GOVERNMENT PROPERTY INCLUDED IN SAID PRICE OR EQUAL TO 50 PERCENT OF THE TOTAL BID PRICE (INCLUDING THE VALUE OF GOVERNMENT PROPERTY), WHICHEVER IS LOWER, (A) NOT TO WITHDRAW ITS BID WITHIN THE OPTION TIME IT HAS ALLOWED IN THE SAID BID OR ANY EXTENSIONS THEREOF GRANTED BY IT TO THE GOVERNMENT, (B) TO ACCEPT A NOTICE OF AWARD MAILED OR OTHERWISE FURNISHED TO IT BY THE GOVERNMENT WITHIN THE SPECIFIED OPTION TIME OR ANY EXTENSION THEREOF AS CONSTITUTING THE EXECUTION OF A VALID AND BINDING CONTRACT BETWEEN ITSELF AND THE GOVERNMENT, AND (E) TO FURNISH TO THE GOVERNMENT A PROPERLY EXECUTED PERFORMANCE BOND AS ELSEWHERE REQUIRED IN THIS INVITATION FOR BIDS WITHIN 10 DAYS AFTER AWARD OF THE CONTRACT. UNLESS THE BID BOND IS RECEIVED PRIOR TO TIME OF BID OPENING, THE BID WILL BE REJECTED AS NONRESPONSIVE. HOWEVER, SUCH BIDS MAY BE CONSIDERED, IF THE BID BOND IS RECEIVED AFTER THE BID OPENING BUT PRIOR TO AWARD AND IT IS DETERMINED BY THE GOVERNMENT THAT FAILURE OF THE BID BOND TO ARRIVE ON TIME WAS DUE SOLELY TO DELAY IN THE MAILS FOR WHICH THE BIDDER WAS NOT RESPONSIBLE.'

UNDER THE TERMS OF THE QUOTED PARAGRAPH, IT APPEARS TO BE AGREED THAT THE BID BOND WAS DEFICIENT BY $40,339.88. ACCORDINGLY, THE BID WAS REJECTED BY THE CONTRACTING OFFICER PURSUANT TO SECTION 2-403A OF THE ARMY PROCUREMENT PROCEDURE FOR FAILURE TO MEET AN ESSENTIAL REQUIREMENT OF THE INVITATION. THE PROCUREMENT WAS AWARDED TO TWO HIGHER BIDDERS ON AUGUST 20, 1959.

IN THE BRIEF SUBMITTED WITH YOUR LETTER OF AUGUST 28, YOU STATE THAT $12,000 OF THE SHORTAGE IN THE BID BOND RESULTED FROM AN INADVERTENCE ON THE PART OF THE BONDING COMPANY, EVIDENTLY IN THE FORM OF A MATHEMATICAL ERROR, IN COMPUTING THE REQUIRED AMOUNT. THE REMAINDER OF THE SHORTAGE IS ATTRIBUTED TO SIMPLE OVERSIGHT BY THE BIDDER, BROUGHT ON UNDOUBTEDLY BY THE NECESSITY FOR SPEED, OF THE NEED FOR A COMMENSURATE INCREASE IN THE BID BOND BECAUSE OF THE TELEGRAPHIC INCREASE IN BID PRICE. YOU POINT OUT THAT WHILE WE HAVE HELD IN PRIOR DECISIONS THAT WHERE A BID BOND IS REQUIRED BY THE TERMS OF THE INVITATION SUCH REQUIREMENT BECOMES A MATERIAL PART OF THE BID, THE SPECIFIC QUESTION OF A DEFICIENCY IN THE AMOUNT OF THE BOND HAS NOT BEEN CONSIDERED EXCEPT IN B-139753, JUNE 19, 1959, WHERE AN APPARENT CEILING ON THE AMOUNT OF THE BOND BELOW THAT REQUIRED UNDER THE TERMS OF THE INVITATION HAD BEEN SET BY THE SURETY. YOU POINT OUT ALSO THAT IN THIS CASE THE GOVERNMENT WOULD HAVE TAKEN NO RISK IN ACCEPTING THE PETTI BID BECAUSE UNDER THE TERMS OF THE INVITATION THE CONTRACTOR WAS REQUIRED PROMPTLY TO FURNISH A PERFORMANCE BOND FULLY PROTECTING THE GOVERNMENT AND THAT UPON ITS FAILURE TO DO SO THE GOVERNMENT COULD HAVE OBTAINED PAYMENT UNDER THE BID BOND MORE THAN ADEQUATE TO COVER ANY FORESEEABLE DAMAGES WHICH MIGHT HAVE BEEN INCURRED AS A RESULT OF THE BREACH. YOU CONCLUDE IN VIEW OF THE FOREGOING, THAT THE REJECTION OF YOUR CLIENT'S BOND WAS IMPROPER.

UNDER THE TERMS OF THE INVITATION THE SUBMISSION OF A BID BOND MUST BE REGARDED AS A MATERIAL REQUIREMENT. AS WE STATED IN 38 COMP. GEN. 532, B- 137319, FEBRUARY 5, 1959, IT IS OUR VIEW THAT THE CONTRACTING OFFICER MAY BY THE TERMS OF THE INVITATION IMPOSE UPON THE BIDDERS ANY REQUIREMENT REASONABLY RELATED TO THE PURPOSES OF THE PROCUREMENT PROVIDED THE REQUIREMENT AND THE CONSEQUENCES OF FAILURE TO CONFORM THERETO ARE CLEARLY SET FORTH IN THE INVITATION. THE LANGUAGE OF THE INVITATION CLEARLY REQUIRES NOT MERELY THE SUBMISSION OF A BID BOND BUT OF A BID BOND IN NOT LESS THAN THE INDICATED AMOUNT. IF THE REQUIREMENT FOR SUBMISSION OF A BID BOND BY THE TERMS OF THE INVITATION IS TO BE REGARDED AS MATERIAL IT LOGICALLY FOLLOWS THAT THE REQUIREMENT AS TO THE AMOUNT OF THE BID IS EQUALLY MATERIAL.

YOUR BRIEF CONSIDERED SITUATIONS WHERE THE BID BOND DEFICIENCY IS VERY SLIGHT. WE AGREE THAT A DE MINIMIS RULE OUGHT TO APPLY. AT WHAT POINT THE DEFICIENCY BECOMES MATERIAL WE NEED NOT HERE CONSIDER EXCEPT TO COMMENT THAT THE DEFICIENCY IN THIS INSTANCE IS TOO LARGE TO BE CONSIDERED WITH THE RULE.

AS YOU POINTED OUT WE NOTED IN B-139753, JUNE 19, 1959, 38 COMP. GEN. 851, IN WHICH THE REJECTION OF A BID BECAUSE OF THE DEFICIENCY IN THE AMOUNT OF AN ACCOMPANYING BID BOND WAS UPHELD, THAT THE AMOUNT OF THE BOND WAS EXPRESSED AS A PERCENTAGE OF THE BID PRICE NOT TO EXCEED AN AMOUNT WHICH WAS, IN FACT, INADEQUATE TO MEET THE BID BOND PROVISION. IN A LATER DECISION, B-140304, SEPTEMBER 21, 1959, WE CAREFULLY NOTED THAT THE BID BOND INVOLVED IN THE EARLIER CASE CONTAINED AN AFFIRMATIVE INDICATION THAT THE SURETY WOULD NOT HAVE BEEN WILLING TO FURNISH A BOND IN THE NECESSARY AMOUNT.

IN THE DECISION WHICH ESTABLISHED THE CURRENT RULE WITH RESPECT TO THE MATERIALITY OF A BID BOND REQUIREMENT, 38 COMP. GEN. 532, WE STATED AS REASONS FOR DEPARTING FROM THE EARLIER RULE, UNDER WHICH THE CAUSES OF THE FAILURE TO MEET THE BID BOND REQUIREMENT WERE CONSIDERED IN DETERMINING THE DISPOSITION OF THE BID, THAT ADHERENCE TO THE EARLIER RULE TENDED TO COMPROMISE THE INTEGRITY OF THE COMPETITIVE BID SYSTEM BY (1) IN EFFECT GIVING THE BIDDER AN OPTION AFTER OPENING TO DECIDE WHETHER TO MAKE HIS BID RESPONSIVE (2) DELAYING PROCUREMENTS BY THE NEED TO INVESTIGATE THE CAUSES OF FAILURE TO COMPLY WITH A BID BOND REQUIREMENT BEFORE AWARD COULD BE MADE, AND (3) CREATING THE POSSIBILITY OF INCONSISTENT TREATMENT OF BIDDERS BECAUSE OF THE NECESSITY SUBJECTIVE DETERMINATIONS REQUIRED OF CONTRACTING OFFICERS. THE SUCCESSOR CONTRACTING OFFICER IN A REPORT OF SEPTEMBER 9, 1959, HAS ABLY POINTED OUT THAT THESE RESULTS COULD FOLLOW EQUALLY IF THE RULE URGED BY YOU WERE ADOPTED. OBVIOUSLY, IF BID BONDS DEFICIENT ONLY BECAUSE OF AN INADVERTENCE, OR SOME OTHER REASON NOT RELATED TO THE BIDDER'S ABILITY TO OBTAIN A BID BOND IN THE NECESSARY AMOUNT, WERE TO BE CONSIDERED ACCEPTABLE IN CASES WHERE THE DE MINIMIS WOULD NOT APPLY, A DETERMINATION BASED ON EXTRINSIC EVIDENCE WOULD BE REQUIRED ESTABLISHING THAT THE REASONS FOR THE FAILURE WERE SUCH AS NOT TO AFFECT THE VALIDITY OF THE ACCOMPANYING BID. ONCE EXTRINSIC EVIDENCE OF THIS KIND WERE RESORTED TO IT WOULD BE MANIFEST THAT THE OBJECTIONS TO THE OLD RULE WOULD APPLY.

YOU POINT OUT THAT NO DOUBT EXISTS AS TO THE ABILITY OF THE PETTI FIRM TO OBTAIN BID BONDS IN THE AMOUNT REQUIRED OR EVEN IN HIGHER AMOUNTS. HAVE NO REASON TO QUESTION THE ACCURACY OF THAT STATEMENT. YOU WILL RECOGNIZE, HOWEVER, THAT IT WOULD BE INEQUITABLE TO APPLY A RULE WITH RESPECT TO THOSE WHO MAY PREVIOUSLY HAVE BEEN ABLE TO DEMONSTRATE A PARTICULAR CAPACITY DIFFERING FROM THAT WHICH WOULD BE APPLIED TO OTHERS WHO MAY NOT HAVE HAD SUCH AN OPPORTUNITY.

IN ACCORDANCE WITH THE FOREGOING, WE MUST CONCLUDE THAT THERE HAS BEEN PRESENTED NO SUFFICIENT LEGAL BASIS UPON WHICH TO DETERMINE THAT ACTION OF THE CONTRACTING OFFICER IN REJECTING THE BID OF CHERUBINE PETTI AND CO., INC., WAS INVALID.