A bid guarantee is a form of security that ensures that a bidder will not withdraw its bid within the period specified for acceptance and, if required, will execute a written contract and furnish required performance and payment bonds. Federal Acquisition Regulation (FAR) sect. 28.001. The bid guarantee secures the surety's liability to the government, thereby providing funds to cover the excess costs of awarding to the next eligible bidder in the event that the bidder awarded the contract fails to fulfill these obligations. A.W. and Assocs., Inc., B-239740, Sept. 25, 1990, 90-2 CPD para. 254 at 2; General Ship and Engine Works, Inc., B-184831, Oct. 31, 1975, 75-2 CPD para. 269 at 2.. When required by a solicitation, a bid guarantee is a material part of the bid and must be furnished with it. Hostetter, Keach & Cassada Constr, LLC, B-403329, Oct. 15, 2010, 2010 CPD para. 246 at 3. Noncompliance with a solicitation requirement for a bid guarantee generally renders the bid nonresponsive and requires the rejection of the bid. FAR sect. 28.101-4(a); A.W. and Assocs., Inc., supra.

Responsiveness of a bid is determined from an examination of the face of the bid bond provided by a bidders' surety, and is limited to whether the surety is clearly bound by the terms of that bid bond. Stay, Inc., B-237073.2, Feb. 26, 1990, 90-1 CPD para. 225 at 3. Thus, we have repeatedly held that a bid bond is defective, rendering a bid nonresponsive, if it is not clear that the bond will bind the surety. All Star Maint., Inc., B-234820, Mar. 24, 1989, 89-1 CPD para. 305 at 2. On the other hand, when a required bid bond is found to be proper on its face, the bond is acceptable and the bid responsive. Contract Servs. Co., Inc., B-226780.3, Sept. 17, 1987, 87‑2 CPD para. 263 at 2-3. Specifically, where a corporate surety is designated, a bid bond is proper "on its face" when it has been duly executed by the surety's agent, the surety has agreed to be obligated for the penal amount of the bond, and the surety appears on the Treasury Circular list of acceptable sureties. See Stay, Inc., supra, at 3.

As indicated, the agency acknowledges that Shaka's bid bond is proper on its face. AR at 4. Nonetheless, the agency claims that it cannot be assured that the surety will honor the bid bond since it appears to be contingent upon a continuing future contractual relationship between Shaka and Fay. AR at 3. Thus, the agency contends that Shaka's bid bond was reasonably deemed to be defective because the surety's liability was limited by Shaka's disclosure letter. AR at 5

We disagree with the agency's conclusion. Even assuming that the principal on a bid bond (that is, the bidder) could independently limit the liability of the surety under the bond, the Shaka disclosure letter contains no such limits. Instead, the letter simply advised the agency that it was obtaining its bid bond from Liberty Mutual because of its subcontractor's relationship with that surety. In addition, the letter requested the agency to notify the surety if this arrangement created an affiliation between the companies that could be seen as violating certain rules and regulations applicable to small business status. While the Corps asserts that this letter could allow the surety not to honor the bid bond in the event that Fay is no longer Shaka's subcontractor, this letter in no way alters the surety's obligation to the Government under the bid bond, which was executed without reservation or limitation. In this regard, Shaka is the only principal named on the bond, Fay is not mentioned in the bond, and the bond does not condition the surety's liability on the relationship between Shaka and Fay. Consequently, we find that the surety is clearly bound by the terms of the bid bond and that Shaka's bid was responsive.  (Shaka, Inc., B-405552, November 14, 2011)  (pdf)

IMC's proposal, 1 of 48 submitted, was evaluated as overall satisfactory. However, the agency found that IMC's bid bond was legally insufficient because it was not an original, lacked an original surety agent's signature, and failed to demonstrate that a duly authorized IMC officer had executed the bid bond. The agency thus excluded IMC's proposal from further consideration for award. The agency selected five contractors to participate in the MATOC and awarded a seed task order for construction of the Albritton Junior High School at Fort Bragg, North Carolina. After notice of the awards and a written debriefing, IMC filed this protest.

IMC protests the agency's rejection of its proposal as legally insufficient, asserting that it submitted an original, duly executed bid bond. Specifically, IMC maintains that, in accordance with the RFP's instructions, it submitted both an original proposal Volume I (stamped "original") which included the original bid bond, and a copy which included a photocopy of the bid bond. IMC speculates that the contracting officer mistakenly furnished the attorney reviewing IMC's bid bond with the copy instead of the original bid bond. Since the only version of IMC's proposal Volume I retained by the agency is not marked "original" and contains a photocopy of the bid bond, Agency Response to Initial Comments para. 6, IMC further speculates that the agency destroyed the original bid bond by mistake. In support of its position, IMC has submitted affidavits from the employees who prepared its proposal that attest to the inclusion of the original bid bond, and a letter from its surety attesting to its provision of an original bid bond. Affidavits of Corporate Secretary and Program Manager; Surety Letter. The contracting officer and specialist, on the other hand, have submitted sworn statements that "to the best of [their] knowledge," IMC submitted a photocopy and not an original of its bid bond. Declarations of Contracting Officer and Contract Specialist.

The determinative question in judging the sufficiency of a bid guarantee such as a bid bond is whether it could be enforced if the bidder subsequently fails to execute required contract documents and to provide performance and payment bonds. TJ's Marine Constr., LLC, B-402227, Jan.7, 2010, 2010 CPD para. 19 at 3. The bid bond must clearly establish the liability of the surety; when the liability is not clear, the bond is defective. BW JVI, LLC, B-401841, Dec. 4, 2009 CPD para. 249 at 3. In general, copies of bid guarantee documents do not satisfy the requirement for a bid guarantee since there is no way, other than referring to the original documents, for the agency to be certain that there had been no alterations to which the surety had not consented and could use as a basis to disclaim liability. TJ's Marine Constr., LLC, supra.

Here, the RFP expressly provided that photocopied bid guarantees would not be acceptable. Further, where, as here, award is made on the basis of initial proposals without discussions, noncompliance with a solicitation requirement for a bid guarantee requires rejection of the proposal as unacceptable, except in situations not present here. FAR sect. 28.101-4. Since the record indicates that at the time of review, IMC's bid bond was determined to be a photocopy, the agency properly rejected IMC's initial proposal.

IMC's assertion that the agency must have discarded IMC's original bond, provides no basis for relief. Agencies have a fundamental obligation to have procedures in place to receive submissions from competitors under a solicitation, to reasonably safeguard submissions received, and to fairly consider all submission received. Safety and Health Consulting Servs., Inc., B‑290412, June 10, 2002, 2002 CPD para. 95 at 2. As a practical matter, however, even with appropriate procedures in place, an agency may lose or misplace a submission, and such occasional loss generally does not entitle an aggrieved competitor to relief. Joint Venture Penauillie Italia S.p.A, B‑298865, B‑298865.2, Jan. 3, 2007, 2007 CPD para. 7 at 6.

This result is justified by the unique circumstances arising in protests concerning lost information. The only means generally available to establish the content of allegedly lost information is for the offeror to reconstruct that information. However, allowing the offeror to do so would be inconsistent with maintaining a fair competitive system. Shubhada, Inc., B-292437, Sept. 18, 2003, 2003 CPD para. 161 at 3-4. Here, there is nothing in the record to independently establish the contents of IMC's original proposal Volume I. In this regard, IMC's corroborating evidence (employee affidavits and surety letter) does not constitute independent corroborating evidence of the original version's contents, including whether it contained an original bid bond instead of a photocopy. See Jay-Brant Gen. Contractors, B-274986, Jan. 10, 1997, 97‑1 CPD para. 17 at 4 (employee statement attesting to submission of original bid bond is insufficient to establish submission of original bond); P.W. Parker, Inc., B-190286, Jan. 6, 1978, 78-1 CPD para. 12 at 3 (evidence from surety, with substantial interest in procurement, cannot be considered independent evidence).

Our office has recognized a limited exception to the rule that negligent loss of proposal information does not entitle the offeror to relief. The exception generally applies where the loss was not an isolated act of negligence, but rather arises out of a systematic failure in the agency's procedures that typically results in multiple or repetitive instances of lost information. Project Res., Inc., B-297968, Mar. 31, 2006, 2006 CPD para. 58 at 2; Shubhada, Inc., supra, at 4. The exception does not apply here as there is no evidence--and IMC has not suggested--that the agency has, for example, lost the proposal information submitted by other offerors, or previously lost proposal information.

In sum, even accepting the possibility that the agency lost or destroyed the original bid bond, on this record, we believe the agency reasonably rejected IMC's proposal as unacceptable.  (Islands Mechanical Contractor, Inc., B-404275, January 24, 2011)  (pdf)
 

Hostetter argues that the discrepancies between its bid and bid bond are minor informalities that do not cast into doubt that the bidder and the bid bond principal are the same entity.

The VA disagrees that the discrepancy is a minor informality, arguing that because the names of the bidder and the bid bond principal are different, it is not clear that the bond would bind the surety. The VA states that VA's Information Letter 049-05-11 provides guidance to the agency's contracting officers regarding their review of surety bonds; this letter generally informs contracting officers that the name of the bid bond principal and the bidder must be the same, and that the type of organization shown on the bid bond must be the same as that on the bid or in ORCA. AR at 3‑4.

A bid guarantee is a form of security that ensures that a bidder will not withdraw its bid within the period specified for acceptance and, if required, will execute a written contract and furnish required performance and payment bonds. FAR sect. 28.001. The bid guarantee secures the surety's liability to the government, thereby providing funds to cover the excess costs of awarding to the next eligible bidder in the event that the bidder awarded the contract fails to fulfill these obligations. A.W. and Assocs., Inc., B-239740, Sept. 25, 1990, 90-2 CPD para. 254 at 2. When required by a solicitation, a bid guarantee is a material part of the bid and must be furnished with it. A.D. Roe Co., Inc., B-181692, Oct. 8, 1974, 74-2 CPD para. 194 at 3. Noncompliance with a solicitation requirement for a bid guarantee generally renders the bid nonresponsive and requires the rejection of the bid. FAR sect. 28.101-4(a); A.W. and Assocs., Inc., supra, at 2.

The sufficiency of a bid guarantee depends on whether the surety is clearly bound by its terms; when the liability of the surety is not clear, the bond is defective. Techno Eng'g & Constr., Ltd., B-243932, July 23, 1991, 91-2 CPD para. 87 at 2. Under the law of suretyship, no one incurs a liability to pay the debts or perform the duties of another unless that person has expressly agreed to do so.  Andersen Constr. Co.; Rapp Constructors, Inc., B‑213955, B-213955.2, Mar. 9, 1984, 84-1 CPD para. 279 at 4. Thus, generally, a bid bond which names a principal different from the bidder is deficient, and the bid must be rejected unless it can be established that the different names identify the same entity. Goss Fire Protection, Inc., B-253036, Aug. 13, 1993, 93‑2 CPD para. 97 at 4; A.D. Roe Co., Inc., supra, at 4-5.

On the other hand, where the entity that submitted the bid and that is identified as the bid bond principal are exactly the same, any discrepancy between the bidder's and bid bond principal's names is merely a matter of form that does not require rejection of the bid. BW JV1, LLC, B-401841, Dec. 4, 2009, 2009 CPD para. 249 at 3. The proper question to be considered is whether the nominal bidder and bid bond principal are the same entity, such that it is certain that the surety will be obligated under the bond to the government in the event that that bidder withdraws its bid within the period specified for acceptance or fails to execute a written contract or furnish required performance and payment bonds. Harris Excavating, B-284820, June 12, 2000, 2000 CPD para. 103 at 4.

Here, Hostetter's bid itself establishes that the bidder and the bid bond principal are the same entity. Although the bid identifies the bidder as "Hostetter, Keach & Cassada, LLC," the bid also includes a DUNS number, ORCA representations and certifications, and certified articles for incorporation that identify the bidder to be "Hostetter, Keach & Cassada Construction, LLC." Moreover, the address identified for the bidder and bid bond principal is the same, and the bid and bid bond are signed by the same individual, who identified himself as vice-president. The record thus shows that the bidder and bid bond principal are the same entity, despite the omission of "Construction" from the name of the bidder. This minor informality or irregularity should have been waived by the contracting officer. See FAR sect. 14.405.

We recommend that the VA make award to Hostetter, as the entity that submitted the lowest responsive bid, if the protester is otherwise found to be responsible. We also recommend that the VA reimburse the protester the reasonable costs of filing and pursuing the protest, including attorneys' fees. 4 C.F.R. sect. 21.8(d)(1) (2010). The protester should submit its certified claim for such costs, detailing the time expended and the costs incurred, directly to the contracting agency within 60 days after receipt of this decision.  (Hostetter, Keach & Cassada Construction, LLC, B-403329, October 15, 2010)  (pdf)

The sufficiency of a bid bond relates to whether the government will receive full and complete protection in the event that the bidder fails to execute the required contract documents and deliver the required performance and payment bonds. BW JVI, LLC, B-401841, Dec. 4, 2009, 2009 CPD para. at 3. As such, a required bid bond is a material condition of an IFB with which there must be compliance at the time of bid opening; when a bidder submits a defective bid bond or uncertainty exists at the time of bid opening that the bidder has furnished a legally binding bond, the bid itself is rendered defective and must be rejected as nonresponsive. See Blakelee Inc., B-239794, July 23, 1990, 90-2 CPD para. 65 at 4; A & A Roofing Co., Inc., B‑219645, Oct. 25, 1985, 85-2 CPD para. 463 at 1-2.

The determinative question in judging the sufficiency of a bid guarantee such as a bid bond is whether it could be enforced if the bidder subsequently fails to execute required contract documents and to provide performance and payment bonds. Southern California Eng'g Co., Inc., B‑232390, Oct. 25, 1988, 88-2 CPD para. 391 at 1. For the bid guarantee to be viewed as enforceable, the surety must appear to be clearly bound based on the information in the possession of the contracting officer at the time of bid opening. Frank & Son Paving, Inc., B-272179, Sept. 5, 1996, 96-2 CPD para. 106 at 1. Copies of bid guarantee documents, whether transmitted electronically or hand-delivered, generally do not satisfy the requirement for a bid guarantee since there is no way, other than by referring to the original documents after bid opening, for the contracting agency to be certain that there had not been alterations to which the surety had not consented and could use as a basis to disclaim liability. Excel Bldg. & Dev. Corp., B-401955, Dec. 23, 2009, 2009 CPD para. __ at 3. See Jay‑Brant Gen. Contractors, B-274986, Jan. 10, 1997, 97-1 CPD para. 17 at 3; G&A Gen. Contractors, B‑236181, Oct. 4, 1989, 89-2 CPD para. 308 at 1.

Here, we find that the USACE properly rejected TJ's Marine's bid. The bid bond submitted with the protester's bid did not contain the surety's agent's original signature. Without referring, after bid opening, to the document containing the surety agent's original signature, the USACE cannot ascertain whether or not there had been alterations to which the surety had not consented and could use as a basis to disclaim liability. Accordingly, TJ's Marine's bid guarantee cannot be viewed as enforceable based on the information in the possession of the contracting officer at the time of bid opening.

We do not agree with the protester that the E-SIGN Act requires the USACE to accept the copy of the surety agent's signature on TJ's Marine's bid bond. The E‑SIGN Act provides that a governmental agency need not accept electronic signatures with respect to a contract. See Excel Bldg. & Dev. Corp., supra, at 4, citing 15 U.S.C. sect. 7001(b)(2), FAR sect. 4.502. TJ's Marine's arguments concerning the FRE are also without merit. The FRE govern the admission of evidence in federal courts. They do not, however, answer the issue here as to whether an agency can ascertain at bid opening whether or not a copied document has been altered from the original. See id. at 4 n. 3.

We also disagree with the protester's suggestion that extrinsic evidence may be submitted after bid opening to establish the enforceability of a bid bond that contained only a copy of the surety agent's signature. Extrinsic evidence may be submitted after bid opening to resolve any minor discrepancies between the principals named on the bid and bid bond, BW JVI, LLC, supra, at 3-4, or to resolve questions regarding the authority of an agent to bind the bidder or surety, Siska Constr. Co., Inc.--Recon., supra, at 4. The issue here, however, does not involve discrepancies between named principals or the authority of agents. Rather, as discussed above, the question in this case is whether the contracting agency could be certain at the time of bid opening that there had not been alterations to the copied bid bond to which the surety had not consented and could use as a basis to disclaim liability. In such cases, the bond's deficiency may not be cured by requesting submission of the original bond documents after bid opening because this would essentially provide the bidder with the option of accepting or rejecting the award by either correcting or not correcting the bond deficiency, which is inconsistent with the sealed bidding system. Bird Constr., B‑240002; B-240002.2, Sept. 19, 1990, 90-2 CPD para. 234 at 2.  (TJ's Marine Construction LLC, B-402227,  January 7, 2010) (pdf)

Excel, which submitted the apparent low bid, provided a bid bond that contained the original signature of the principal and a copy of the surety agent’s signature and seal. The contract specialist contacted the surety, who informed her that the original bond would have an original seal affixed to it. The contract specialist also contacted the surety’s agent, who signed the bond, and he explained that he had emailed a copy of the bond to Excel and that the original, which he sent by FedEx, was received by the protester after bid opening. Agency Report (AR), Tab 8, Contracting Specialist’s Memorandum, at 1. The agency rejected the protester’s bid as nonresponsive and awarded the contract to the second low bidder. Contracting Officer’s Statement at 2. This protest followed.

Excel argues that it in fact submitted an original bid bond, explaining that its submitted bid bond was an original print of the bond emailed to it by the surety’s agent. Protest at 1. The protester argues that “once the contents of the email were printed and signed by Excel . . . an original bid bond was created.” See Protester’s Comments at 2. The protester also contends that the signatures and seals on the bond are clear and legible and that the bond is binding regardless of whether the signatures are in their original ink, and adds that the power of attorney accompanying the bond expressly states that “[t]he corporate seal is not necessary for the validity of any bonds . . . [and t]he signature of any such officer and the corporate seal may be printed by facsimile.” Protester’s Response to Agency’s Dismissal Request at 1-2, citing Excel’s Bid Bond at 3. According to the protester, signing, sealing, emailing, and then physically mailing the bond is standard industry practice. See Protester’s Comments at 1, 3. Moreover, the protester argues that the Uniform Electronics Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce (E-SIGN) Act have legitimized the use of email as a binding method of conducting business, and the Federal Rules of Evidence (FRE) recognizes a print-out of an email to be an original document. Id. at 2-3, citing FRE Rule 1001(3).

The agency responds that the protester did not submit an original bid bond, which raised questions as to whether the bid document was altered. AR at 1. In this regard, the Forest Service questions why the surety would send the original bond document by FedEx if, as the protester argues, the emailed version was the original. The agency adds that it is not concerned with whether the power of attorney is binding because photocopies or facsimile copies of powers of attorney are permitted under the Federal Acquisition Regulation (FAR). See FAR sect. 28.101-3 (2009). Citing the IFB’s incorporation of FAR sect. 52.228-1(a), which provides that “[f]ailure to furnish a bid guarantee in the proper form and amount, by the time set for opening of bids, may be cause for rejection of the bid,” the agency argues that it properly rejected the protester’s bid in accordance with that provision and FAR sect. 14.404-2(j) (bid shall be rejected where bidder fails to furnish bid guarantee in accordance with requirements of IFB).

The sufficiency of a bid bond relates to whether the government will receive full and complete protection in the event that the bidder fails to execute the required contract documents and deliver the required performance and payment bonds. BW JVI, LLC, B-401841, Dec. 4, 2009, 2009 CPD para. at 3. As such, a required bid bond is a material condition of an IFB with which there must be compliance at the time of bid opening; when a bidder submits a defective bid bond or uncertainty exists at the time of bid opening that the bidder has furnished a legally binding bond, the bid itself is rendered defective and must be rejected as nonresponsive. See Blakelee Inc., B--239794, July 23, 1990, 90--2 CPD para. 65 at 4; A & A Roofing Co., Inc., B--219645, Oct. 25, 1985, 85--2 CPD para. 463 at 1-2.

The determinative question in judging the sufficiency of a bid guarantee such as a bid bond is whether it could be enforced if the bidder subsequently fails to execute required contract documents and to provide performance and payment bonds. Southern California Eng’g Co., Inc., B‑232390, Oct. 25, 1988, 88-2 CPD para. 391 at 1. For the bid guarantee to be viewed as enforceable, the surety must appear to be clearly bound based on the information in the possession of the contracting officer at the time of bid opening. Frank & Son Paving, Inc., B-272179, Sept. 5, 1996, 96-2 CPD para. 106 at 1. Copies of bid guarantee documents, whether transmitted electronically or hand-delivered, generally do not satisfy the requirement for a bid guarantee since there is no way, other than by referring to the original documents after bid opening, for the contracting agency to be certain that there had not been alterations to which the surety had not consented and could use as a basis to disclaim liability. See Jay‑Brant Gen. Contractors, B-274986, Jan. 10, 1997, 97-1 CPD para. 17 at 3; G&A Gen. Contractors, B-236181, Oct. 4, 1989, 89-2 CPD para. 308 at 1.

Moreover, a bond deficiency may not be cured by submitting the original bond documents after bid opening because this would essentially provide the bidder with the option of accepting or rejecting the award by either correcting or not correcting a bond deficiency, which is inconsistent with the sealed bidding system. Bird Constr., B-240002; B-240002.2, Sept. 19, 1990, 90-2 CPD para. 234 at 2. For this reason, a surety’s post-bid opening letter to the contracting officer cannot establish the liability of the surety and responsiveness of the protester’s bid. A nonresponsive bid cannot be made responsive after bid opening through an explanation of what the bidder or surety intended. Design for Health, Inc., B-239730, Sept. 14, 1990, 90-2 CPD para. 213 at 3.

Here, we find that the Forest Service properly rejected Excel’s bid. The bid bond submitted with the protester’s bid did not contain the surety’s agent’s original signature and seal. Without referring, after bid opening, to the document containing the surety agent’s original signature, the Forest Service cannot ascertain whether or not there had been alterations to which the surety had not consented and could use as a basis to disclaim liability. Accordingly, Excel’s bid guarantee cannot be viewed as enforceable based on the information in the possession of the contracting officer at the time of bid opening.

We do not agree with Excel that the E-SIGN Act requires the Forest Service to accept the copy of the surety agent’s signature on Excel’s bid bond as an original signature. Rather, the E-SIGN Act provides that a governmental agency need not accept electronic signatures with respect to a contract. See 15 U.S.C. sect. 7001(b)(2). In this regard, the FAR provides that agencies may accept electronic signatures and records in connection with government contracts, see FAR sect. 4.502(d), but also recognizes that in allowing the use of electronic commerce, agencies may have to supplement electronic transactions “by using other media to meet the requirements of any contract action governed by the FAR (e.g., transmit hard copy of drawings).” See FAR sect. 4.502(a).  (Excel Building & Development Corporation, B-401955, December 23, 2009)  (pdf)

The protester's bid identified the bidder as "BW JV1" of 2735 S. Krahn Road, New Berlin, Wisconsin, and was signed by Bruce Witt, President, and Keith Harenda, Project Director. The accompanying bid bond identified the principal as "BW JVI" of 1237 W. Bruce Street, Milwaukee, Wisconsin, and contained signatures that appeared to be those of Messrs. Witt and Harenda. The principal on the bid bond was identified as a "joint venture" under the "Type of Organization" section of the bid bond. Attached to the bid bond was a notarized "Acknowledgement of Principal" that identified the principal that executed the "foregoing instrument" (that is, the bid bond) to be "KPH Construction Corp."; this acknowledgment was signed by Keith P. Harenda as President of KPH Construction Corp. AR, Tab 4, BW JV1 Bid.

(sections deleted)

The protester contends that the bid and bid bond were submitted by the same entity. In this regard, the protester explains that the bidder, BW JV1, is a joint venture and that both members of the venture signed the bid and bid bond as President and Project Director of BW JV1. Protest at 2, 5. The different addresses, the protester further explains, are mutually agreed upon offices provided under the joint venture agreement. Id. at 4. Any discrepancy between the names, the protester argues, is an insignificant typographical error which the agency should waive as an informality or minor irregularity under applicable provisions of the FAR. Id. at 4, 7--8, citing FAR sections 14.301(a), 28.101-4(c)(7), 52.214-19(b). The protester also argues that the additional acknowledgment of principal does not affect the validity of the bid bond, because this acknowledgment was not required by the IFB. Finally, the protester has provided a letter from its surety, which states that it stands behind the validity of bond.

The sufficiency of a bid bond relates to whether the government will receive full and complete protection in the event that the bidder fails to execute the required contract documents and deliver the required performance and payment bonds. Martina Enter./Tom Swenson Gen. Contractors, B-250766, Oct. 21, 1992, 92‑2 CPD para. 266 at 2 (holding that the bid of a joint venture, which submitted a bid bond in the name of only one of the corporations forming the joint venture, is nonresponsive). Among other things, the terms of the bid bond must clearly establish the liability of the surety at the time of bid opening; when the liability is not clear, the bond is defective. Design for Health, Inc., B-239730, Sept. 14, 1990, 90-2 CPD para. 213 at 2. A surety does not incur a liability to pay the debts of another unless it expressly agrees to be bound. Mount Diablo Corp., Inc., B‑228193, Nov. 10, 1987, 87-2 CPD para. 475. For this reason, we rigidly apply the rule that the principal listed on the bid bond must be the same as the nominal bidder. Opine Constr., B-218627, June 5, 1985, 85-1 C.P.D. para. 645. If the bid bond names a principal different from the nominal bidder, it is deficient and may not be corrected after bid opening as a minor informality. Atlas Contractors, Inc./Norman T. Hardee, a Joint Venture, B-208332, Jan. 19, 1983, 83-1 CPD para. 69 at 3.

Where the entity that submitted the bid and that is identified as the bid bond principal are exactly the same, any discrepancy between the bidder's and bid bond principal's names is merely a matter of form that does not require rejection of the bid. Harris Excavating, B-284820, June 12, 2000, 2000 CPD para. 103 at 3, citing K-W Constr., Inc., B-194480, June 29, 1979, 79-1 CPD para. 475. Extrinsic evidence that is reasonably or publicly available and in existence at the time of bid opening may be provided to establish the identity of the bidder and bid bond principal as the same entity. Gem Eng'g Co., B-251644, Mar. 29, 1993, 93-1 CPD para. 303 at 2 (award to second-low bidder properly terminated where corporate records and Dun & Bradstreet report resolved discrepancy in the name of the low bidder and bid bond principal); Lamari Elec. Co., B-216397, Dec. 24, 1984, 84-2 CPD para. 689 at 2 (entity submitting the bid and identified as the bid bond principal was the same, an individual using different trade names); Jack B. Imperiale Fence Co., Inc., B-203261, Oct. 26, 1981, 81-2 CPD para. 339 at 2 (discrepancy in corporate names used in bid and bid bond resolved through submission of corporation records, tax forms, bid bonds, insurance papers, loan documents, and contract documents); K-W Constr., Inc., supra. (bidder's and bid bond principal's identity established through submission of corporate documents).

Although extrinsic evidence available to the contracting officer indicates that the different spellings of the bidder's name (that is, BW JV1 and BW JVI) concern a discrepancy that appears to be a mere matter of form, the identification of a corporation as the entity that executed the bid bond calls into question the liability of the surety with respect to the joint venture, thus rendering the bid nonresponsive. Specifically, the bid bond's notarized acknowledgment of the principal states that the person executing the bid bond is Keith P. Heranda, as president of KPH Construction Corp., and that this is "the corporation described in and which executed the foregoing instrument," i.e., the bid bond. AR, Tab 4, BW JV1 Bid. The principal identified on the face of the bid bond, however, is BW JV1, a joint venture, and not KPH Construction Corp. Moreover, although KPH Construction is one of the two joint venture members, the protester's joint venture agreement provides that the bid bond had to be executed by both venture members. See Joint Venture Agreement at 6. We find that the bid bond is unclear as to which entity executed the bid bond and that this casts doubt on whether the surety would be liable to the government in the event that the joint venture failed to execute contractual documents after acceptance of the bid.

In sum, we find that the agency properly rejected the protester's bid as nonresponsive. See Dick Enter., Inc., B-259686, B-259686.2, June 21, 1995, 95-1 CPD para. 286 at 2-3 (surety's liability inconclusive where bid submission names several legal entities and bid signed by vice president of one corporation, but bond signed by joint venture member). Where a protester submits a bid bond that creates an ambiguity in the identity of the principal and the nominal bidder, the contracting offcer is not obligated to reconcile the ambiguity by deductions and inferences in order to make the bid responsive. MKB Constructors, Inc., B-255098, Jan. 10, 1994, 94-1 CPD para. 10 at 3. The bidder's intention is established at the time of bid opening and the bidder bears the primary responsibility for properly preparing its bid documents in such a fashion that the contracting officer may accept the bid with full confidence that an enforceable contract conforming to all the requirements of the IFB will result. See Outdoor Venture Corp., B--235056, June 16, 1989, 89-1 CPD para. 571 at 2.  (BW JV1, LLC, B-401841, December 4, 2009) (pdf)

The IFB, issued on August 11, 2008, required a bid guarantee in the form of a bid bond in the amount of 20 percent of the bid. Mill City Partnership, the apparent low bidder at $5,678,625, identified itself in the bid forms alternately as Mill City Environmental Corp. (MCE), or Mill City Environmental Corp. w/ Teaming Partner C.R.C. Co., Inc. (Mill City Partnership). Agency Report (AR) Tab 13.

The accompanying bid bond identified its principal as C.R.C. Company, Inc. AR, Tab 13, at 13. The principal was identified as a "corporation" under the "Type of Organization" section of the bid bond. Id. The signature block on the bond contained the signature of CRC’s president. Id.

By letter dated September 29, the contracting officer notified Mill City that its bid was nonresponsive because of a deficiency in its bid bond. AR, Tab 7. The Corps awarded the contract to the next low bidder, Green Seal Environmental, Inc., at $5,793,221.45. Contracting Officer’s Statement at 2.

The sufficiency of a bid bond relates to whether the government will receive full and complete protection in the event that the bidder fails to execute the required contract documents and deliver the required performance and payment bonds. Martina Enter./Tom Swenson Gen. Contractors, B-250766, Oct. 21, 1992, 92‑2 CPD para. 266 at 2 (holding that the bid of a joint venture, which submitted a bid bond in the name of only one of the corporations forming the joint venture, is nonresponsive). Among other things, the terms of the bid bond must clearly establish the liability of the surety at the time of bid opening; when the liability is not clear, the bond is defective. Design for Health, Inc., B-239730, Sept. 14, 1990, 90-2 CPD para. 213 at 3. A surety does not incur a liability to pay the debts of another unless he expressly agrees to be bound. Mount Diablo Corp., Inc., B‑228193, Nov. 10, 1987, 87-2 CPD para. 475 at 2. For this reason, the principal listed on the bid bond must be the same legal entity as the nominal bidder. Reliable Elec. Constr., Inc., B‑250092, Sept. 23, 1992, 92-2 CPD para.198 at 2. If the bid bond names a principal different from the nominal bidder, it is deficient and may not be corrected after bid opening as a minor informality. Atlas Contractors, Inc./Norman T. Hardee, a Joint Venture, B-208332, Jan. 19, 1983, 83-1 CPD para. 69 at 3.

In the present case, the surety’s liability under the bid bond is contingent upon the bid being in the name of the corporation listed on the bid bond, i.e., "C.R.C. Company, Inc." While it is not clear here whether the bidder was MCE or Mill City Partnership, it is clear that the nominal bidder was not "C.R.C. Company, Inc." Thus we agree with the contracting officer that it is unclear that the surety would necessarily be bound in the event that the joint venture failed to execute the contract upon acceptance of its bid or declined to furnish acceptable performance or payment bonds.  (Mill City Partnership, B-400712, December 16, 2008)  (pdf)
 

In its protest, Simont argues that the omission of the bid guarantee was in good faith, and that it should be allowed to submit a bid guarantee now. Simont states that it was misled by the deletion of “NFAS sect. 5252.228-9302” and the failure to list the bid guarantee as a required element of the bid in the “Instructions to Bidders” section of the IFB. Protest at 2.

Simont also points to the IFB provision requiring prospective bidders to pose any questions at least 10 days before the bid opening. IFB at 5; Amend. 2 at 4. The protester explains that since the bid opening was scheduled for July 24, and amendment 2 was posted electronically on July 16 (which was only 8 days before the bid opening), Simont was prohibited from resolving its confusion over the requirements of the amended IFB.

NAVFAC argues first that amendment 2 eliminated the conflict between the 2 percent bid guarantee required by FAR sect. 52.228-1 and the 20 percent bid guarantee required by NFAS sect. 5252.228-9302 by deleting the NFAS provision.

The NAVFAC argument is complicated by the fact that the NFAS bid guarantee provision was misidentified in the original IFB as sect. 5254.201-9300. As a result, prospective bidders faced a challenge in understanding what was being deleted. Since amendment 2 did not explain that the provision being deleted had a different label in the original IFB, the prospective bidders (1) had to discern that the provision being deleted could be found in the NAVFAC Contracting Manual (made more difficult because its provisions are not part of the Navy FAR Supplement), (2) locate a copy of the Manual (such as at the Internet address noted previously), (3) look up sect. 5252.228-9302, and (4) search the IFB for text that matched the provision in the manual. Ultimately, bidders had to deduce that, notwithstanding the discrepancy, NAVFAC’s intention was to delete the mislabeled provision.

NAVFAC emphasizes that the amended IFB reiterated the requirement for a two percent bid guarantee, the protester’s bid did not include a bid guarantee of any type, and none of the exceptions in FAR sect. 28.101-4 applies. Therefore, NAVFAC argues, it was legally required to reject the protester’s bid. See FAR sect. 28.101-4(a).

A bid guarantee assures that the bidder will, if required, execute a written contract and furnish performance and payment bonds. Curry Envtl. Servs., Inc., B-228214, Dec. 9, 1987, 87-2 CPD para. 570 at 2. Where a solicitation requires bidders to submit bid guarantees with their bids, and a bidder fails to do so (and no exception applies), the bid must be rejected. Lawson’s Enters., Inc., B-286708, Jan. 31, 2001, 2001 CPD para. 36 at 2. Affording a bidder the opportunity to supply its bid guarantee later provides the bidder the option of accepting or rejecting the award by either correcting or not correcting a deficiency, which would be inconsistent with the sealed bidding system. Western Mgmt. Servs., Inc.; Mac-Bestos, Inc., B-266147, B‑270153, Jan. 23, 1996, 96‑1 CPD para. 17 at 2-3.

In our view, amendment 2 confirmed the continuing validity of the original bid guarantee provision, FAR sect. 52.228-1. We believe that any ambiguity caused by NAVFAC’s errors was patent and therefore had to be protested before the deadline for submission of bids. 4 C.F.R. sect. 21.2(a)(1). Thus, even if the error by Simont was subjectively in good faith, its bid was properly rejected because it did not include the bid guarantee required by the IFB, notwithstanding the confusion regarding NAVFAC’s intent to delete the conflicting mislabeled bid guarantee provision.  (Simont S.p.A., B-400481, October 1, 2008) (pdf)
 

The protester focuses on four passages from the FAR to support its assertion that the contracting officer unreasonably determined that its surety’s asset was unacceptable. First, it argues that FAR sect. 28.203-2(a)--“The Government will accept only cash, readily marketable assets, or irrevocable letters of credit”--makes any “readily marketable asset” acceptable. Second, the protester argues that paragraph (b) of FAR sect. 28.203-2 is not an all-inclusive list--“[a]cceptable assets include,” (emphasis added)--and so the drafters of the FAR must have intended for other assets, not included in the list, to also be acceptable. Third, the statement in FAR sect. 28.203-2(c) that “[u]nacceptable assets include but are not limited to. . .” suggests that there must be acceptable assets other than those listed in paragraph (b). Finally, the protester argues that the asset offered, mined coal, is nothing like the assets that the FAR cites as examples of prohibited personal property--jewelry, furs and antiques. The protester argues that what distinguishes unacceptable assets from acceptable assets is the latter’s identifiable value and ready marketability. Thus, the protester argues, an antique, more difficult to appraise and to liquidate, is unacceptable, while coal, which has an ascertainable value and a ready market, is acceptable. We disagree. The protester’s interpretation of the FAR to permit the acceptance of coal as an asset reads out of the FAR the indispensable guarantee that the government can collect on the bond, namely, the fact that the personal property backing the bond has been placed in escrow.[6] Thus, to be an acceptable personal property asset under the FAR, an asset must be capable of being placed in an escrow account. See FAR sect. 28.203-1(b)(1). As noted above, SF 28 requires individual sureties to describe the escrow account into which the surety will place the personal property being pledged in support of the bond. The protester’s arguments are inconsistent with the regulatory framework set forth in the FAR and the accompanying SF 28. The protester also asserts that it had a right to substitute assets under FAR sect. 28.203‑4. Comments on Teleconference at 4. That provision gives a surety the right to request asset substitution, not the right to the substitution. See FAR sect. 28.203-4 (noting that an “individual surety may request the Government to accept a substitute asset. . . . The contracting officer may agree to the substitution of assets.”). Furthermore, while agencies may not automatically reject a bidder for unacceptable individual sureties because the SF 28 and supporting documentation contain minor defects that might easily be remedied, Gene Quigley, Jr., B-241565, Feb. 19, 1991, 91-1 CPD para. 182 at 4, the wholesale substitution of assets is not one of the minor document defects that are contemplated in Quigley. (Tip Top Construction Corporation, B-311305, May 2, 2008) (pdf)

When required by a solicitation, a bid bond or other bid guarantee is a material part of the bid, noncompliance with which renders the bid nonresponsive and generally requires rejection of the bid. FAR sect. 28.101-4(a); Nova Group, Inc., B-220626, Jan. 23, 1986, 86-1 CPD para. 80 at 2. This is because permitting correction of a bid guarantee after bid opening would open the door to manipulation of the competitive bidding system by permitting a bidder to decide after other bids have been exposed whether to attempt to have its bid accepted or rejected. Trans South Indus., Inc., B-224950, Dec. 19, 1986, 86-2 CPD para. 692 at 2. A bid bond submitted with an invalid power of attorney certificate renders the bid nonresponsive. See, e.g., Big River Constr. Co., B-250961, Oct. 26, 1992, 92-2 CPD para. 283 at 2; Techno Eng’g & Constr., Ltd., B-243932, July 23, 1991, 91-2 CPD para. 87 at 2-3. This is so because a power of attorney authorizes an agent to act for the surety and only a valid power of attorney would indicate that the surety expressly agreed to be bound to pay the bond signed by the attorney-in-fact. E&R, Inc., supra, at 4. A power of attorney is to be strictly construed. The surety’s power of attorney must establish unequivocally that the individual who signed the surety’s bond was authorized to bind the surety, and we will not convert ambiguous aspects of powers of attorney into mere matters of form which can be explained away and waived. Id. Here, the surety’s power of attorney attached to the bond listed only Ms. Allen and Mr. Kingsbury as attorneys-in-fact authorized to bind EMC, and did not also list Mr. Hixenbaugh, the individual who signed the bond as attorney-in-fact on behalf of the surety. The failure of EMC’s power of attorney to list Mr. Hixenbaugh thus created an uncertainty as to whether Mr. Hixenbaugh was duly authorized to bind EMC, thereby rendering the bond defective and JMW’s bid nonresponsive under the regulations then in effect. See Techno Eng’g & Constr., Ltd., supra. (Johnson Machine Works, Inc., B-297115, October 20, 2005) (pdf)

The test in these cases is whether the government can enforce the bond against the surety in the event the bidder fails to execute the required contract documents and deliver the required bonds. Professional Restoration Servs., Inc., supra. We find that because the liability limit specified was inconsistent with, and for a sum less than, the penal sum required by the IFB, Armstrong’s bid guarantee was, at best, ambiguous concerning the enforceable amount of the bid guarantee. Wagner Moving and Storage, supra (bid is nonresponsive where bid bond included the penal sum specified by the IFB, but surety’s liability limitation was limited to an amount less than that required by the IFB); cf. Professional Restoration Servs., Inc., supra (bid bond is enforceable against a corporate surety that specifies an intent to be bound to the penal sum by correctly completing the liability limit portion of the bid bond form, even though the penal sum was left blank).[1] Since none of the waiver provisions in FAR § 28.101-4(c) were applicable, we find that the agency properly rejected Armstrong’s bid as nonresponsive. Armstrong’s later submission of a “corrected” bid bond raising the surety’s liability limit does not alter the fact that the bid was nonresponsive. The determination as to whether a bid is acceptable must be based solely on the bid documents themselves, as they appear at the time of bid opening. Drill Constr. Co., Inc., B-239783, June 7, 1990, 90-1 CPD ¶ 538 at 2. Thus, the offer after bid opening to change the surety’s liability limit could not cure the defect. As for Armstrong’s assertion that the agency would realize a significant cost savings with the acceptance of its bid, notwithstanding the defective bid bond, we note that the public interest in strictly maintaining the sealed bidding procedures required by law outweighs any monetary advantage which the government might gain in a particular case by a violation of those procedures. Cherokee Enters., Inc., B-252948, B-252950, June 3, 1993, 93-1 CPD ¶ 429 at 4. (Armstrong Elevator Company, B-292864.2, April 13, 2004) (pdf)

Here, we find that GSA properly rejected McGhee’s bid because the language “20% of the Attached Bid” in McGhee’s bid guarantee created at least an ambiguity concerning the penal sum amount of McGhee’s bid guarantee. Although it is true, as McGhee notes, that we have found that where, as here, the penal sum amount is expressed as a percentage of the bid price (and not as a specific amount), the upward correction of the bid after bid opening (due to a mistake in bid) did not render the bid guarantee amount inadequate, because the penal sum amount of the bid guarantee was increased by the bid correction. See Reynosa Constr., Inc., B‑278364, Dec. 15, 1997, 97-2 CPD ¶ 165 at 2-3, recon. denied, B‑278364.2, Apr. 28, 1998, 98-1 CPD ¶ 124 at 3. Unlike Reynosa, however, the protester here, in addition to stating its penal sum amount as a percentage of its bid price, also limited its penal sum amount of its bid guarantee to a percentage of the “attached bid.” As indicated by GSA, the bid to which the bid guarantee was actually attached was not priced but stated “no bid” for each CLIN. Thus, we agree with GSA that McGhee’s limitation of its penal sum amount to a percentage of the “attached” bid created significant doubts whether an upward increase in the penal sum amount by reason of its bid modification would be enforcible against the surety. This is so because the language of the bid guarantee indicates that the bidder intended to restrict its penal sum amount to a percentage of the bid price expressed in the attached document without providing for possible subsequent changes in the bid price. Thus, at a minimum, McGhee’s bid guarantee is ambiguous concerning the amount of the bid guarantee, and therefore must be rejected as nonresponsive. See Johnston Eng’g, Inc., B‑258180, Dec. 16, 1994, 94-2 CPD ¶ 246 at 2-3; Cherokee Enters., Inc. B-252948, B‑252950, June 3, 1993, 93-1 CPD ¶ 429 at 3. (McGhee Construction, Inc., B-293239, February 5, 2004)  (pdf)
 

Horizon’s bid guarantee did not include SF 28, Affidavit of Individual Surety, but instead included a document captioned "Power of Attorney." This power of attorney was signed "Robert Joe Hanson, Attorney-in-Fact, Global Bonding" and identified "Global Bonding" as "attorney in fact" for Robert Joe Hanson. The power of attorney also contained a representation of assets identified as “Corporate Financial Debenture Note #2003-1, $50,000,000.000 Hexagon Consolidated Companies of America." In addition, Horizon’s bid bond included a document identifying Hexagon Consolidated Companies of America as a "guarantor" pledging $50 million in the form of "Corporate Debenture Number Two Thousand Three dash One (2003-1), to back Global Bonding . . . Attorney in Fact for Robert Joe Hanson . . . ."  In sum, given that the identity of the surety for Horizon’s bid bond was unclear and the bid guarantee was materially deficient because it did not include an SF 28 as required by the solicitation, we see no basis to question the agency’s conclusion that Horizon’s proposal was unacceptable.  (Horizon Shipbuilding, Inc., B-292992, December 8, 2003)  (pdf)

In our view, the contracting officer reasonably imposed the bid and performance bond requirement here. As the BLM explains, the requirement is necessary to ensure completion before the bicentennial celebration of the Lewis and Clark expedition ends and protect against losses resulting from a defaulting contractor's failure to meet this deadline. As noted above, the timely completion of this project was “critical” to the agency, given the project's “great historical significance.” Contracting Officer's Statement at 1, 5. While AAP contends that the bond requirement “does not guarantee” timely performance and was not needed, Protester's Comments at 4, this disagreement with the BLM's judgment does not render it unreasonable. D.J. Findley, Inc., B-221096, Feb. 3, 1986, 86-1 CPD ¶ 121 at 4. Although a bond requirement may restrict competition, and may even exclude some small businesses, that possibility alone, absent a finding of unreasonableness or bad faith, does not render a bond requirement improper. Maintrac Corp., B‑251500, Mar. 22, 1993, 93-1 CPD ¶ 257 at 3. AAP has presented no evidence of bad faith and, as discussed above, we find that the BLM's determination was reasonable.  (American Artisan Productions, Inc., B-292380, July 30, 2003)  (pdf)

CCI confuses the RFP's requirement to provide specified information to establish "bonding capability" (the least important of the four subfactors under the management and organization factor) with a sealed bid requirement for a bid bond. A bid bond requirement is a material condition of a sealed bid procurement with which there must be compliance at the time of bid opening; if the agency cannot determine definitely from the documents submitted with the bid that the surety would be bound, the bid is nonresponsive and must be rejected. Schrepfer Indus., Inc., B‑286825, Feb. 12, 2001, 2001 CPD P: 23 at 2. There was no such stringent requirement here. In particular, a bid bond was not required to establish bonding capability; rather, the RFP required only that offerors *[p]rovide Bonding Capability for projects of size and nature envisioned [in the RFP] on surety's letterhead in amount of not less than $10,000,000.00. Bonding capability shall be accompanied by a document authenticating the agent's authority to sign bonds for the surety company pursuant to FAC5252.228-9305 in Section I.*[5] RFP at 91. The agency explains that these submissions were considered representations as to the offerors' capability to obtain appropriate bonds, and were not intended to obligate the bonding companies.[6] Supplemental Agency Report at 2. Here, all offerors, including the four challenged by CCI, provided the requisite information on their surety's letterhead, indicating a bonding capability of the $10 million minimum. Since the agency's position--that this aspect of the evaluation was intended only to assess offerors' prospective ability to obtain bonding--is borne out by the language of the RFP, and the offerors in question provided the requested information, we find nothing unreasonable in the agency's determination that the information furnished by the offerors met this requirement.  (C Construction Co., Inc., B-291792; B-291792.2; B-291792.3, March 17,  2003)  (txt version)

While we have recognized a power of attorney bearing mechanically applied signatures as valid and binding where there is evidence demonstrating that the surety intends to be bound by such signatures, see Fiore Constr. Co., B-256429, June 23, 1994, 94-1 CPD ¶ 379 at 2-3, we conclude that, for a mechanically applied signature to be recognized as valid and binding, it must be affixed to the power of attorney after the power of attorney has been generated. Where, as here, signatures are generated as part of a document, as opposed to being affixed to the document after its generation, they do not constitute an affirmation as to the correctness of its contents and thus do not serve to validate the document. In the absence of a validating signature, there is no way to be certain at the time of bid opening that the file from which a computer printer-generated power of attorney/certification was created has not been altered, just as there is no way to be certain that the original from which a faxed or photocopied power of attorney/certification was created has not been altered.  While, as noted above, an original certification from a current officer of the surety attesting to its authenticity and continuing validity would have been sufficient to validate the power of attorney that accompanied All Seasons’ bid bond, the certification submitted by the protester’s surety suffered from the same defect as the power of attorney itself--i.e., it contained only a computer printer-generated signature; thus, it did not serve to validate the power of attorney. Moreover, the certification is itself of questionable validity because it clearly had been altered--through insertion of the date August 9, 2002-- after being printed, and there is no evidence that the assistant vice president whose computer printer-generated signature appears beneath the certification was aware of or approved the alteration.  Because neither the power of attorney nor the certification of continuing validity attached to the protester’s bid bond bore signatures that had been applied to the document after its creation, we think that the contracting officer reasonably concluded that they did not establish unequivocally at the time of bid opening that the bond would be enforceable against the surety in the event that the bidder failed to meet its obligations. Accordingly, she properly rejected All Seasons’ bid as nonresponsive.  (All Seasons Construction, Inc., B-291166.2, December 6, 2002) 

Protester's bid was properly rejected as nonresponsive where it contained a commercial bid bond form that limited the surety's liability to the government in the event of a default to the difference between the protester's bid and the new award amount, contrary to the terms of the solicitation, which required the surety to be liable for all reprocurement costs, up to the penal amount of the bond.  (Paradise Construction Company, B-289144, November 26, 2001)

Protest that agency was required to reject bid for failure to satisfy bid guarantee requirement is denied where the amount of the contested bid guarantee was greater than the difference between that firm's bid and next low bid and agency properly decided to waive the requirement; fact that contested bid included inconsistent language regarding the amount of the bid guarantee did not require rejection.  (South Atlantic Construction Company, LLC, B-286592.2, April 13, 2001)

Agency properly determined bid bond accompanied by photocopied power of attorney unacceptable because photocopied power of attorney does not establish unequivocally at the time of bid opening that the bond would be enforceable against the surety in the event that the bidder fails to meet its obligations.  (Schrepfer Industries, Inc., B-286825, February 12, 2001)

Protester's bid is responsive, despite a discrepancy in the name of the bidder as identified on the bid and the name of the principal identified in the required bid bond, where reasonably available extrinsic evidence in existence at the time of bid opening establishes that the bidder and principal are the same entity, such that there is no doubt that the surety will be liable under the bond to the government on the bidder's behalf.  (Harris Excavating, B-284820, June 12, 2000)

Photocopies of bid guarantee documents generally do not satisfy the requirement for a bid guarantee since there is no way, other than by referring to the originals after bid opening, to be certain that there had not been alterations to which the surety had not consented, and that the government would therefore be secured. A faxed bid guarantee document, which is an electronically transmitted copy, is subject to the same uncertainty.  (Kemper Construction Company, Inc., B-283286.2, November 29, 1999)

(b) Where individual sureties are involved, a completed Affidavit of Individual Surety (Standard Form 28), for each individual surety, shall accompany the bond. The Government may require the surety to furnish additional substantiating information concerning its financial capability.

AR at 35. Therefore, in accordance with the IFB provisions, individual sureties providing a bid bond were required to complete both the SF 24 and SF 28.

The SF 28, Affidavit of the Individual Surety, is a one-page form that generally required the individual surety to describe the assets that were being pledged in support of the bid bond. AR at 229. Blocks 1-6 of the form required personal contact information and employer information. Id. In block 7(a) of the SF 28, the individual surety was required to give a full representation of the pledged assets. The individual surety had to disclose the encumbrances, liens or judgments attached to the pledged assets. Id. Block 7(b) required the individual surety to “describe the assets, the details of the escrow account, and to attach certified evidence thereof.” Id. Block 8 required the individual surety to identify mortgages, liens, judgment, and other encumbrances on the pledged asset. Id. Block 9 stated that the surety must identify all bonds for which the subject assets had been pledged within the past three years. Finally, blocks 10, 11 and 12 were set aside for signatures and execution by a notary public. Id.

The SF 28 was required to be accompanied by a Certificate of Pledged Assets. AR at 232. The Certificate of Pledged Assets certified that the individual surety (1) has good title of the pledged assets, (2) has pledged assets free from liens and encumbrances, (3) will not assign or sell any rights of the pledged assets to another party, and (4) has provided that the government has been given a secured interest in the assets pursuant to Article 9 of the Uniform Commercial Code (UCC). Id.

On January 10, 2008, the agency opened bids. The agency received three bids: GEC Inc., with a total bid price of $7,950,000; Island Roads Corporation (IRC) with a total bid price of $6,929,380; and Tip Top with a total bid price of $6,482,505. AR at 218. Tip Top was the lowest bidder, being $1.4 million dollars lower than IRC’s bid. Tip Top also estimated that it would take 300 calendar days to complete construction of the five-leg roundabout and other miscellaneous work, as opposed to the 675 calendar days proposed by IRC. Id.

Tip Top utilized Edmund C. Scarborough (ECS), as an individual surety to furnish plaintiff’s bid bond asset. AR at 227-32. Connie F. Souleyrette, ECS’s attorney-in-fact, signed the bid bond (SF 24), Affidavit of Surety (SF 28), and accompanying Certificate of Pledged Assets. Id. In the Certificate of Pledged Assets, ECS described the proffered asset as an “allocated portion of $191,350,000.00 of previously, mined, extracted, stockpiled, marketable, coal, located on the property of E.C. Scarborough, all of that certain lot of parcel of land in Kentucky District, Nicholas County, West Virginia.” AR at 232. ECS pledged that the asset was “free from liens and encumbrances or prior pledge, and [ECS] has full authority to transfer said assets as collateral in support of bonds.” Id. ECS affirmed that, during the term of this contract, ECS “shall not assign or sell any rights to the pledged assets, or pledge the same assets to another pledgee.” Id. ECS further affirmed that “[n]o other bonds have been pledged to the allocated portion of the assets which are subject of the attached Certificate of Pledged Assets.” AR at 229. ECS also declared to the FHWA that the government was being given a security interest in the pledged asset pursuant to Article 9 of the UCC:

The Pledgee [FHWA] understands acknowledges that fulfillment of this pledge is subject to a valid and final determination that the Principal [Tip Top] cannot or will not accept the contract for performance of the project for which its bid or proposal has been submitted and the failure of the individual surety to otherwise fulfill the obligations of the bid bond. Upon default of payment by the individual surety named above on the bid bond identified above, or breach of this pledge agreement, the Pledgee/Obligee or holder shall have full rights to foreclose on the above-described assets and exercise its rights as a secured party pursuant to Article 9 of the Uniform Commercial Code.

AR at 232. 

Based on its low bid, and the anticipation that it had fulfilled the requirements of the IFB, Tip Top expected to be awarded the contract. However, FHWA’s contracting officer (CO), in a letter dated February 19, 2008, rejected Tip Top’s bid on the basis that plaintiff had failed to “furnish a bid guarantee in accordance with the requirements of the invitation for bids.” AR at 233. The basis for the CO’s rejection of Tip Top’s bid was set forth as follows:

We have reviewed the Bid Bond submitted with your Bid in response to the subject Invitation for Bid and find it to be inadequate. It does not meet the requirements of the Federal Acquisition Regulations (FAR) for an individual surety at Section 28.203. Individual Surety Bonds must be supported by acceptable assets, as listed in the FAR. Acceptable assets include cash, United States Government securities, stocks and bonds that are actively traded, real property owned in fee simple, and irrevocable letters of credit. Speculative assets-which would include marketable coal-are specifically excluded by Subsection 28.203- 2(c)(7).

Your bid is hereby rejected in accordance with FAR Section 14.404-2(i), failure to furnish a bid guarantee in accordance with the requirements of the invitation for bids.

Id. In short, Tip Top was eliminated from the competition because the agency did not consider “marketable coal” as an acceptable asset for a bid bond. In the agency’s view, marketable or mined coal was a “speculative asset” excluded by section 28.203-2(c)(7) of the Federal Acquisition Regulation (FAR).

(sections deleted)

In this case, the CO rejected Tip Top’s coal asset on two grounds: (1) that the asset “does not meet the requirements of the Federal Acquisition Regulations (FAR) for an Individual Surety at Section 28.203. . . . Acceptable assets include cash, United States Government securities, stocks and bonds that are actively traded, real property owned in fee simple, and irrevocable letters of credit” and, (2) that the coal asset is a “speculative asset,” which is specifically excluded by Subsection 28.203-2(c)(7).” AR at 233. Plaintiff contends that the CO’s determination that the pledged coal was an unacceptable asset was arbitrary and unreasonable because the CO did not give Tip Top an opportunity, as the lowest bidder, to resolve concerns that FHWA had about the coal asset and/or to allow substitution of the asset under FAR 28.203-4. Pl.’s Mot. at 2. Tip Top further contends that but for the CO’s violation of the FAR regulations, Tip Top would have won the contract as the low, responsive, responsible, bidder. Id.

In rebuttal, the government asserts that the CO’s determination was based on a rational interpretation of the FAR, and thus, was not arbitrary, or capricious. The government’s main arguments are: (1) the pledged coal is not an acceptable asset under the FAR; (2) that the CO had no duty to request, or to even consider additional information regarding the coal, and (3) the CO had no duty to suggest substitution of the coal asset and had discretion to reject plaintiff’s request that it be allowed to substitute the asset. Def.’s Mot at 13-22, 33-37. Thus, the primary issue in this case is whether the CO had a rational basis for determining that Tip Top’s pledged coal was not an acceptable asset to cover the bond obligation and rejecting its proposal on that basis. See Hawaiian Dredging, 59 Fed. Cl. at 308 (“The test under the arbitrary and capricious standard is whether ‘the contracting agency provided a coherent and reasonable explanation of its exercise [of] discretion.’”) (quoting Impresa, 238 F.3d at 1333)). The court’s review of the CO’s responsibility determination will focus on the CO’s February 19, 2008 decision, which set forth the grounds upon which the CO based her decision. In SEC v. Chenery Corp., 332 U.S. 194 (1947), the Supreme Court stated:

[A] reviewing court, in dealing with a determination or judgment which an administrative agency alone is authorized to make, must judge the propriety of such action solely by the grounds invoked by the agency. If those grounds are inadequate or improper, the court is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis. To do so would propel the court into the domain which Congress has set aside exclusively for the administrative agency.

SEC, 332 U.S. at 196. As this court stated in All Seasons:

It is the agency’s decision, not the decision of the GAO that is subject to judicial review. Chas. H. Tompkins Co. v. United States, 43 Fed. Cl. 716 (1999). Although the GAO upheld the agency’s decision on grounds not asserted by the contracting officer (“CO”), this Court lacks authority to uphold an agency action on grounds not considered by the agency. OMV Medical Inc. v. United States, 219 F.3d 1337, 1343-44 (Fed. Cir. 2000). 

All Seasons, 55 Fed. Cl. at 177 n.1. For clarification purposes, the court emphasizes that in determining whether the CO’s decision to reject the coal asset was proper, it will not consider material that was not before the CO when she made her February 19, 2008 decision. None of the evidence gathered after the CO’s decision on February 19, 2008, including documents filed with the GAO, following Tip Top’s protest of the bid solicitation, will be considered by this court in its determination as to whether the CO acted in an arbitrary and capricious manner.3 See Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 420 (1971) (stating that review of the agency’s decision must be based on the record that was before the agency at the time it made its decision); Rig Masters, Inc. v. United States, 70 Fed. Cl. 413, 424 (2006) (“We review the materials before the agency when it made its procurement selection and cannot accept any ‘post hoc rationalizations’ offered as the basis for the decision.”) (citation omitted); Al Ghanim Combined Group Co. Gen. Trad. & Cont. W.L.L. v. United States, 56 Fed. Cl. 502, 508 (2003) (stating that post-hoc rationalizations should be “afforded limited importance in the court’s analysis,” and the court’s review should focus on the evidence that was before the agency when it made its final decision). Following precedent, the court has reviewed the documents that were before the CO when she made her February 19, 2008 decision. The court concludes, as shown below, that the CO’s reasoning was rational, and thus, was not arbitrary, or capricious.  (Tip Top Construction Corporation, Inc., v. U. S., No. 08-352C, August 1, 2008) (pdf)

The Government’s dispute is with the procedures themselves. It is not for the trial court to devise a procedure that fills in a gap that the FAR does not recognize as a critical interval. Specifically, the administrative record reveals that Arch Insurance will not deliver the performance bond if the contract is awarded to plaintiff; that plaintiff may or may not have been authorized to submit the surety’s bid bond; that plaintiff did not have a surety in place; and that the one currently under consideration is suspect. The FAR provides that the bid guarantee will be called on if the contractor cannot deliver the performance bond when required. Were the court to rule that Contract Administrator Mitchell could avert further delay by taking preemptive action, the door would open for any surety after bid opening and upon further reflection to call in its disinclination not to make good on an otherwise valid, authorized guarantee. The certainty and predictability of reliance on surety guarantees would be hostage to the whims of the surety. Indeed, if a surety notified the procuring official of its disinclination and the latter decided to proceed nonetheless and hold the surety to its commitment, a new cause of action could be spawned. Defendant’s position also cannot be sustained because it would require the court to find the terms “firm commitment” and “reasonably acceptable to the Government” to provide the regulatory authority for the procuring officer’s exercise of discretion after bid opening and after receipt of an otherwise facially valid bid bond. Plaintiff’s admission in the phone call between Mr. Mitchell and Mr. Williams appears in the handwritten Phonecon Record as “[a]dmitted Arch won’t bond them. Looking for other sureties.” That does not equate to an admission that the bid guarantee was invalid, i.e., that it was not an enforceable contract. At most, it is a candid statement that the surety may be backing out of what was a firm commitment. If this court were to allow the Government to interpret broadly the term “firm commitment” to extend beyond what it means at the time of bid opening, procuring officials would be able to inquire with the surety to learn if the surety will actually do what it promised to do. The exception urged by defendant would swallow the rule. It would also be impossible to determine what level of reliability of evidence a procuring official could base such a decision on without basically legislating new procedure. That is not this court’s role. While defendant urges expediently that the ruling it seeks would protect the Government better than the regulation, the real protection would be accorded the surety, which now would be able to back out of a “firm commitment” whenever it chooses merely by giving word to the agency. Even bidders would reap a benefit from such a ruling, for if a surety with second doubts creates a reasonable basis to justify rejection of a bid, then the bidder itself could take advantage and assert the same basis to justify withdrawal of its bid. (Aeroplate Corporation v. U. S., No. 05-736C, August 5, 2005) (pdf)

Defendant and intervenors have argued that a mechanically applied signature does not give adequate assurance that the document has not been modified. All Seasons explained this rationale, as follows:

While we have recognized a power of attorney bearing mechanically applied signatures as valid and binding where there is evidence demonstrating that the surety intends to be bound by such signatures, [see Fiore, B-256429, 94-1 CPD ¶ 379, at 2-3, 1994 U.S. Comp. Gen. LEXIS 553, at *4], we conclude that, for a mechanically applied signature to be recognized as valid and binding, it must be affixed to the power of attorney after the power of attorney has been generated. Where, as here, signatures are generated as part of a document, as opposed to being affixed to the document after its generation, they do not constitute an affirmation as to the correctness of its contents and thus do not serve to validate the document. In the absence of a validating signature, there is no way to be certain at the time of bid opening that the file from which a computer printer-generated power of attorney/certification was created has not been altered, just as there is no way to be certain that the original from which a faxed or photocopied power of attorney/certification was created has not been altered.

Unlike the document in All Seasons, plaintiff submitted powers of attorney with certificates restating board resolutions by which the surety bound itself to facsimile signatures on a power of attorney or any certificate relating to the power of attorney. This affirmation, combined with a facially valid appointment and original corporate seal, in their totality establish unequivocally that the surety intends to be bound.  However, in this regard a mechanical signature is not unique in any way compared with an original wet signature. The risk of fraud or forgery is inherent in any executed document.  Since 1994 the GAO has recognized that mechanically applied signatures can give the requisite unequivocal assurance. In the present case, the surety went so far as to state unequivocally that facsimile signatures on both the powers of attorney and certificates are valid and that, per the certificates, it agrees to be bound by them. This may even be greater assurance that the surety intends to stand behind the document than would be present if an original wet signature were present without a statement that the surety intends to be bound by any wet signature.  Although the contracting officer’s decision to reject plaintiff’s bids was unreasonable, it is not unreasonable because he relied on GAO precedent. As discussed, contracting officers often rely on GAO decisions for guidance. However, in this case the contracting officer had to determine whether plaintiff’s powers of attorney documents were sufficient to bind the surety. It is unreasonable for a contracting officer to rely on unreasonable rationale when making such a decision.  As applied by the contracting officer, All Seasons would prevent all uses of facsimile signatures because the contracting officer would not be able to tell if the signature had been mechanically applied after the document was generated. Mechanical signatures require additional indicia that the surety intends to be bound. By including a statement that the surety intends to be bound by all facsimile signatures, the surety has made it unequivocally clear that it intends to be bound by mechanically applied signatures. (Hawaiian Dredging Construction Co., Inc. v. U. S. and Nova Group, Inc., No. 03-2763C, January 9, 2004.) (pdf)

As other commentators have noted, “bid bonds and bid guarantees add an incredible amount of complexity and cost to sealed bid procurement. It is extremely doubtful whether such cost and complexity is justified by whatever benefits the Government receives from bonds and guarantees.” JOHN CIBINIC JR., & RALPH C. NASH, JR., BID BONDS AND BID GUARANTEES: THAT TAIL IS STILL WAGING, 16 NO. 3 NASH & CIBINIC REP. P. 12 (March, 2002).  In the end, it is not for the Court to establish procurement policy. Plaintiff’s remedy would be to seek an amendment to the FAR that explicitly details the requirements for a valid power of attorney. This would greatly serve to reduce confusion among the surety industry while ensuring that the government pays the lowest-available price.  Ultimately however, the VA and the GAO decisions, that facsimile or photocopied powers of attorney should be rejected based on the rationale that the documents could have been manipulated without the alterations being apparent upon examination, cannot be called irrational. Bid bonds provide a greater opportunity for fraud than payment and performance bonds because bid bond sureties are rarely called upon to reimburse the government. The bid bond surety’s obligations are satisfied once payment and performance bonds are provided and the contract is executed. In most situations, the bid bond becomes a moot issue and it is unlikely that any fraud will be revealed. It was not irrational for the Comptroller General to adopt a firm rule that a CO could easily apply to determine bid bond deficiency instead of relying on a totality of the circumstances test. The CO would only be able to determine if there had been any alterations by comparing the photocopy to the original power of attorney. The fact that the IFB does not expressly prohibit a photocopied power of attorney does not render the CO’s actions irrational. In this case, other bidders such as Witherington submitted bid bonds accompanied by an original power of attorney. The GAO decisions cannot be found to be irrational and the CO did not act arbitrarily or capriciously in adopting the GAO’s recommendations that photocopied power of attorneys render the bid non-responsive.  (All Seasons Construction, Inc., v. U. S. and Withering Construction Corp., No. 02-1895 C, January 23, 2003)

As a result of the Government’s action in this case, the District of Columbia is being forced to spend $312,653.00 more than initially expected to construct a public school because of a technicality in a bid bond that was no longer in effect at the time the agency protest that resulted in Plaintiff’s loss of the contract was filed, and where the government suffered no injury.  Furthermore, the protester, the lowest bidder, is a minority contractor and one that is preferred by the Army Corps of Engineer’s client, the District of Columbia Public Schools. AR 512.  Nevertheless, the Court is constrained to hold that Defendant’s decision to award the contract to Hess based on Division Counsel’s determination that Plaintiff’s bid was non-responsive due to a defect in the bid bond discovered after expiration of the bid bond was not arbitrary, capricious, or in violation of law.  (Davis/HRGM Joint Venture v. U. S., No. 01-414C, October 15, 2001)  (pdf)

Clearly, the process of sealed bidding does not afford the opportunity for each bidder that might submit a defective bid bond to manifest its intent post-bid opening. Accordingly, Interstate’s failure to submit a properly executed bid guarantee rendered its bid nonresponsive. The government is not permitted to consider Interstate’s explanation concerning the defect in its bid bond, and Interstate is not entitled to alter its bid with additional documents following bid opening. Interstate requested FHWA to declare its bid responsive on the basis of Interstate’s explanation that (1) the omission of the penal sum was a clerical error; and (2) it had previously executed a proper bid bond, but that it asked the surety to execute a second bid bond because the first one was partially illegible. FHWA was entirely correct in rejecting this request.  (Interstate Rock Products, Inc. v. U.S., No. 01-408C, September 17, 2001)