B-235171, Jul 18, 1989, 89-2 CPD 58

B-235171, Jul 18, 1989, 89-2 CPD 58

PROCUREMENT - Sealed Bidding - Bid guarantees - Responsiveness - Sureties - Liability restrictions DIGEST: A commercial bid bond form that limits the surety's obligation to the difference between the amount of the awardee's bid and the amount of a reprocurement contract materially differs from the standard form government bid bond and thus renders a bid nonresponsive.

Allgood Electric Company:

Allgood Electric Company protests the rejection of its apparent low bid as nonresponsive under invitation for bids (IFB) No. 557-9-89, issued by the Department of Veterans Affairs (VA) for the replacement of a fire alarm system at the Carl Vinson VA Medical Center. The VA rejected the bid after it determined that Allgood's bid bond was deficient. Allgood disagrees with the VA's determination.

We deny the protest.

The IFB required the submission of a bid guarantee and a Standard Form 24 (SF 24) /1/ was provided in the solicitation package for use by the bidders. The solicitation, by incorporation of FAR Sec. 52.228 1 (FAC 84-27), provided the requirements to be met for a bid guarantee to be acceptable. The IFB further cautioned that a bidder's failure to furnish a bid guarantee in the proper form and amount might be cause for rejection of the bid. Allgood states that it did not receive an SF 24 in its bid package and instead submitted a bid bond on a commercial form furnished by its surety, Fidelity and Deposit Company of Maryland.

The VA determined that Allgood's bid bond was unacceptable because it did not afford the government the same protection as that afforded by the standard form. By letter of April 6, 1989, the agency informed Allgood that its bid was rejected as nonresponsive because Allgood's bid bond materially differed from the requirements of FAR Sec. 52.228-1 and the provisions of the SF 24. In particular, the VA noted that: (1) Allgood's bond binds the principal and surety to the Carl Vinson VA Medical Center and not the United States of America as the SF 24 provides; (2) the surety, upon Allgood's default, /2/ would only be liable for the difference between the amount of Allgood's bid and the amount contracted with another firm to perform the same work, whereas the solicitation bid guarantee provision and SF 24 permit the government to recover "any cost of procuring the work which exceeds the amount of the bid"; (3) the bid guarantee fails to specify the time period in which the surety would remain obligated to the government; and (4) the bid guarantee is uncertain as to the extent of liability it provides since it states the amount of surety liability as "20%" without stating any base amount to which that percentage applies (i.e., the bond fails to state whether the surety is liable for 20 percent of any certain price or 20 percent of the bid price).

A bid guarantee assures that the bidder will not withdraw its bid within the time specified for acceptance and, if required, will execute a written contract and furnish performance and payment bonds. When the guarantee is in the form of a bid bond, it secures the liability of a surety to the government if the holder of the bond fails to fulfill these obligations. O.V. Campbell and Sons Industries, Inc., B-216699, Dec. 27, 1984, 85-1 CPD Para. 1. The guarantee also is available to offset the cost of reprocurement of the goods or services in question. See Kiewit Western Co., 65 Comp.Gen. 54 (1985), 85-2 CPD Para. 497. A bidder's use of a commercial bid bond form, rather than SF 24, is not per se objectionable, since the sufficiency of the bond does not depend on its form, but on whether it represents a significant departure from the rights and obligations of the parties as set forth in SF 24. D. B. Johnson Construction Co., Inc., B-224390, Sept. 10, 1986, 86-2 CPD Para. 284.

Allgood contends that the solicitation did not expressly require the use of the SF 24 bond form here and that, in any event, there is no substantial difference between the bid bond it submitted and the SF 24 since its bond affords the government the requisite protection. disagree.

Allgood's bond, by its express terms, limits the recovery of the government in case of default to the difference between the amount of a replacement contract, provided that such difference does not exceed the penal sum, which amount is also in question here since the insertion of 20 percent, without more, is subject to interpretation. The surety's liability, as set forth in this bond, thus significantly differs from the rights afforded the government under the explicit terms of the solicitation, which includes FAR Sec. 52.228-1(e), and SF 24, which we have interpreted as allowing the government to recoup "all costs" directly attributable to the default of an awardee, for example, administrative costs or the cost of performing in-house. See Kiewit Western Co., supra. Consequently, Allgood's promise merely to cover the difference in prices provides insufficient protection to the government.

In our opinion, this alone is sufficient to find the commercial bond defective, and we need not decide the propriety of the additional rejection grounds stated by the VA. We therefore conclude that the VA properly rejected Allgood's bid as nonresponsive since the protester's bid bond was deficient. Worth Contracting, Inc., B-228553, Oct. 28, 1987, 87-2 CPD Para. 413.

The protest is denied.

/2/ Default in this context means the successful bidder's failure to execute any post-award contractual documents and furnish payment and performance bonds. Trans Alaska Mechanical Contractors, B-204737, Sept. 29, 1981, 81-2 CPD Para. 268.

/1/ Federal Acquisition Regulation (FAR) Sec. 53.301-24 (FAC 84-7).