Harvest Construction Company

B-267513 Nov 16, 1995 Jump To VIEW DECISION DOWNLOADS RELATED PAGES GAO CONTACTS Highlights A firm protested the Department of Agriculture's (USDA) rejection of its low bid for the excavation and construction of stream fords, contending that USDA: (1) unreasonably determined that its bid bond was deficient; and (2) should have waived any perceived deficiency, since there was no reason to assume that it would fail to perform the contract in full. GAO held that USDA: (1) properly rejected the protester's bid as nonresponsive, since its bid bond did not bind the surety if the protester fails to pay all costs in the event of default; and (2) could not waive the deficiency after bid opening. Accordingly, the protest was denied. View Decision Matter of: Harvest Construction Company File: B-267513 Date: November 16, 1995 Protester's bid was properly rejected as nonresponsive where it contained a commercial bid bond form which extinguished the surety's liability once the bidder paid costs associated with its default equal to the penal sum of the bond, contrary to Federal Acquisition Regulation Sec. 52.228-1(e) and standard form 24, which require the surety to be liable for all costs associated with contractor default up to the penal sum of the bond. Attorneys DECISION Harvest Construction Company protests the rejection of its low bid as nonresponsive under invitation for bids (IFB) No. R3-12-95-22, issued by the Department of Agriculture for the excavation and construction of various low water crossing sites in Tonto National Forest, Arizona. Harvest contends that the agency improperly determined its submitted bid bond was deficient. We deny the protest. The IFB was issued on May 17, 1995, and required that all bidders submit a bid guarantee in the amount of 20 percent of the bid price, or $3 million, whichever was the lesser amount. The IFB incorporated and set forth Federal Acquisition Regulation (FAR) Sec. 52.228-1, which provides that a bidder's failure to furnish the required bid guarantee in the proper form and amount "may be cause for rejection of the bid" and which further mandates at subparagraph 1(e) that: "In the event the contract is terminated for default, the bidder is liable for any cost of acquiring the work that exceeds the amount of its bid, and the bid guarantee is available to offset the difference." (Emphasis added.) Additionally, the IFB advised bidders that the required bid guarantee "should be on Standard Form (SF) 24" ( see FAR Sec. 53.301-24), which provides in pertinent part that the surety's liability under the bond is void if, in the event of contractor default, the bidder pays the government "for any cost of procuring the work which exceeds the amount of the bid." Thus, FAR Sec. 52.228-1 and SF 24 establish that the bidder is liable to the government for all costs associated with its default, and that the surety's liability is not extinguished unless all such costs are paid by the bidder. At the June 27 bid opening, eight bids were received. Harvest submitted the apparent low bid. However, instead of providing its bid guarantee on the requested SF 24 bid bond form, Harvest submitted a commercial bid bond form. Unlike the language from the SF 24 quoted above, Harvest's bid bond provided that the surety's liability under the bond is void if, in the event of default, the bidder pays to the government the costs associated with the default "not exceeding the penalty of this bond." The contracting officer viewed the commercial bid bond as unacceptable and rejected Harvest's bid as nonresponsive. On August 11--after learning that its agency-level protest was denied--Harvest filed this protest with our Office. A bid guarantee assures that a bidder will, if required, execute a written contract and furnish payment and performance bonds. LM Envtl., Inc., B-245388.3, June 30, 1992, 95-2 CPD Para. 159. When the guarantee is in the form of a bid bond, it secures the liability of the surety to the government if the holder of the bond fails to fulfill these obligations. Seither & Cherry Co., B-242220, Apr. 10, 1991, 91-1 CPD Para. 365. The guarantee is also available to offset the cost of reprocurement of the goods or services. See Kiewit W. Co., 65 Comp.Gen. 54 (1985), 85-2 CPD Para. 497. A bidder's use of a commercial bond form, rather than the standard government form (SF 24), is not per se objectionable, since the sufficiency of the bond does not depend on its form, but on whether it represents a significant departure from the rights and obligations of the parties as set forth in the IFB. Seither & Cherry Co., supra. Instead, the determinative question as to the acceptability of a bid bond is whether the bid documents establish that the bond is enforceable against the surety for the required protection amount should the bidder fail to meet its obligations. See ERC General Contracting Servs., Inc., B-261404.2, Oct. 11, 1995, 95-2 CPD Para.