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)

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)