Universal Coatings, Inc., B-278700, March 4, 1998

B-278700 Mar 04, 1998 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights DIGEST Bid bond which mistakenly included language that stated that payment on the bond was contingent upon the bidder entering into the identified contract. Of the standard condition that payment is contingent on the bidder submitting the bid on the identified solicitation. Is nevertheless clearly enforceable against the surety in the event the bidder declines to execute the contract and provide acceptable performance and payment bonds. Whichever is less. Which was accompanied by a bid bond issued by Amwest Surety Insurance Company on an SF 24-type form generated by the surety's bonding agent. The computer-generated form was identical to the government's SF 24. The submitted SF 24 was entitled "Bid Bond" and in all other respects used the term "bid. View Decision Matter of: Universal Coatings, Inc. File: B-278700 Date: March 4, 1998 DIGEST Attorneys DECISION Universal Coatings, Inc. protests the rejection of its bid under invitation for bids (IFB) No. DACA51-97-B-0043, issued by the United States Army Corps of Engineers, for reroofing certain buildings at the Defense Logistics Agency Depot, Warren, Ohio. Universal contends that the Corps improperly determined its bid to be nonresponsive due to a defective bid bond. We sustain the protest. Section 000700, paragraph 105, of the IFB required each bidder to submit a bid guarantee, in the form of a bid bond or other security, in the amount of 20 percent of the bid price or $3,000,000, whichever is less, and noted that the failure to furnish a bid guarantee on a standard form (SF) 24 in the proper form and amount by the time set for opening of bids may be cause for rejection of a bid. Paragraph 109 of the same section required the contractor to furnish a performance bond on SF 25 and a payment bond on SF 25A within 10 days of award. At bid opening, the Corps received 14 bids. Universal submitted the low bid of $818,500, which was accompanied by a bid bond issued by Amwest Surety Insurance Company on an SF 24-type form generated by the surety's bonding agent. The computer-generated form was identical to the government's SF 24, except for language in the section entitled "CONDITIONS." The standard language in this section of the SF 24 states: The Principal has submitted the bid identified above. However, the language in this section contained in Universal's bid bond stated: The Principal has entered into the contract identified above. The submitted SF 24 was entitled "Bid Bond" and in all other respects used the term "bid," for example, "Bid Price," "Bid Identification," and "Bid Date." Additionally, the submitted SF 24 properly identified this IFB in the appropriate section of the form. The Corps concluded that the language on the computer-generated SF 24 created a condition that rendered the bid bond unenforceable. By this language, according to the Corps, the surety would be relieved of liability under the bond should Universal refuse to enter into the contract. Therefore, the Corps rejected Universal's bid as nonresponsive. This protest followed. Award has been withheld pending our decision. It appears that, in generating the bid bond, the "Conditions" language was mistakenly taken from the corresponding section of the SF 25. Universal submitted a letter from the agent, along with a corrected SF 24, confirming that the surety intended to bind itself unconditionally in accordance with the standard terms of the SF 24 for this IFB. Universal contends that the erroneous language was a minor defect that did not render the bid bond unenforceable against the surety and that the error could not reasonably be construed to void the surety's responsibility, given the nature of the error and the remaining terms expressed on the submitted SF 24. A bid guarantee is a form of security ensuring that the bidder will not withdraw a bid within the period specified for acceptance, and will execute a written contract and furnish required bonds within the time specified in the bid. Federal Acquisition Regulation (FAR) Sec. 28.001. A bond is a written instrument executed by a principal party, i.e., the bidder or contractor, and a surety or sureties to ensure fulfillment of the principal's obligations to a third party, i.e., the government. Id. A bid bond holds the surety liable to the government for the excess costs of awarding to the next eligible bidder in the event that the principal bidder fails to fulfill the obligations of its bid. Johnson Controls, Inc., B-270036, Jan. 19, 1996, 96-1 CPD Para. 94 at 2. The submission of a required bid bond is a material condition with which a bid must comply at the time of bid opening to be responsive. The sufficiency of a bid bond depends on whether the surety is clearly bound by its terms; where the liability of the surety is not clear, the bond is defective.