Protest of Bid Rejection as Nonresponsive

B-200125: Nov 10, 1980

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A company protested the rejection of its bids as nonresponsive under two invitations for bids (IFB) by the Forest Service for road construction. The Forest Service rejected the protester's bids under both IFB based upon its belief that the terms of the protester's letters of credit (LOC), offered as bid guarantees (BG), were legally insufficient. A BG ensures that a successful bidder will go forward with its contractual commitment to execute contract documents, if any, and provide required performance and payment bonds. Each IFB required that BG be in the form of a firm commitment, such as a bid bond, postal money order, certified check, irrevocable LOC or, in accordance with the Treasury Department regulations, certain bonds or notes of the United States. In reviewing the BG, the Forest Service concluded that the language of the LOC would not afford the government full and complete protection in the event that the protester failed to execute required contract documents and deliver performance and payment bonds. GAO disagreed with the agency rationale because the agency defined the contract performance too narrowly by limiting it only to performance of the work called for by the road construction specifications. Thus, the Forest Service excluded the concept of contract performance compliance with all other contractual terms and conditions. Furthermore, GAO did not believe that the usage of term offer in the LOC in any way qualified the bank's pledge to secure the protester's actions. Awards have been made under both IFB. The Forest Service advised GAO that a significant amount of excavation and road construction work had already begun on both contruction contracts. Because of this, GAO did not believe it would be in the best interest of the government to terminate the contacts and to award new contracts to the protester, since the costs would exceed the savings to be obtained.

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