[Federal Register Volume 70, Number 189 (Friday, September 30, 2005)]
[Rules and Regulations]
[Pages 57459-57462]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-19474]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 19 and 28

[FAC 2005-06; FAR Case 2003-029; Item VII]
RIN 9000-AK01


Federal Acquisition Regulation; Powers of Attorney for Bid Bonds

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on a final rule 
amending the Federal Acquisition Regulation (FAR) to establish that a 
copy of an original power of attorney, including a photocopy or 
facsimile copy, when submitted in support of a bid bond, is sufficient 
evidence of the authority to bind the surety. The authenticity and 
enforceability of the power of attorney at the time of the bid opening 
will be treated as a matter of responsibility.

DATES: Effective Date: September 30, 2005.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat at (202) 501-4755 
for information pertaining to status or publication schedules. For 
clarification of content, contact Ms. Cecelia L. Davis, Procurement 
Analyst, at (202) 219-0202. Please cite FAC 2005-06, FAR case 2003-029.

SUPPLEMENTARY INFORMATION:

A. Background

    This final rule amends the Federal Acquisition Regulation to revise 
the policy relating to acceptance of copies of powers of attorney 
accompanying bid bonds. There has been a significant level of 
controversy surrounding contracting officers' decisions regarding the 
evaluation of bid bonds and accompanying powers of attorney.
    Since 1999, a series of GAO decisions has rejected telefaxed as 
well as photocopied powers of attorney. The latest decision from GAO 
(All Seasons Construction, Inc., B-291166.2, Dec. 6, 2002) has been 
interpreted by industry and procuring agencies to require a contracting 
officer to inspect the power of attorney at bid opening to ascertain 
that the signatures are original and applied after generation of the 
documents. This case law has created a costly and unworkable 
requirement for the surety industry and left contracting officers with 
an almost impossible standard to enforce. More recently, on January 9, 
2004, the U.S. Court of Federal Claims, in Hawaiian Dredging 
Construction, Co. v. U.S., 59 Fed. Cl.205 (2004), issued a ruling 
highlighting that the FAR does not require an original signature on the 
document serving as evidence of authority to bind the surety. The court 
was critical of GAO's reasoning in the All Seasons case. In response to 
the split between the two bid protest fora and the quandary shared by 
industry and government in implementing a workable standard to be 
applied at bid opening, the Councils agreed to a revision to FAR part 
28 that would remove the matter of authenticity and enforceability of 
powers of attorney from a contracting officer's responsiveness 
determination, which is based solely on documents available at the time 
of bid opening. Instead, the rule instructs contracting officers to 
address these issues after bid opening as a matter of responsibility.
    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 69 FR 51936, August 23, 2004, and 46 public comments were 
received. A resolution of the public comments follows:

[[Page 57460]]

Summary of the Public Comments/Disposition

    Some commenters agree with the proposed rule and expressed 
appreciation for the clarification the proposed rule would bring to a 
presently unworkable situation.

    Comment: By making authenticity of the power of attorney a matter 
of responsibility, where small businesses are concerned, a contracting 
officer's decision becomes subject to referral to the Small Business 
Administration (SBA) for a certificate of competency. To resolve this 
issue, the commenter suggested the following language for the FAR: 
``Subpart 19.6 does not apply to determinations of responsibility of 
sureties or on the acceptability of powers of attorney.'' This language 
is based on GAO case law holding that acceptability of individual bid 
bond sureties need not be referred to the SBA because such 
determinations are based solely on the qualifications of the surety and 
not the small business offeror.

    Response: The Councils concur with the interpretation of GAO case 
law cited. Referral to SBA of a contracting officer's non-
responsibility finding, pursuant to FAR subpart 19.6, is a matter 
arising entirely out of the small business' qualifications, not that of 
the surety. However, in the interest of being entirely clear on this 
issue, the Councils adopted language in paragraph 28.101-3(f), that a 
non-responsibility determination is not subject to the Certificate of 
Competency process if the surety has disavowed the validity of the 
power of attorney.

    Comment: One commenter requests clarification regarding the extent 
to which the review of a power of attorney is a matter of 
responsiveness. As written, the issue is only one of responsiveness if 
a signed and dated power of attorney is not submitted. The commenter 
requests a revision to state a power of attorney should be rejected if 
it is obvious that the document is invalid. The commenter has received 
powers of attorney that indicate on their face that they have expired 
or do not name the individual who signed the bid bond.

    Response: The Councils disagree and feel the proposed rule makes 
clear the responsiveness determination is very narrow. To insert 
language requiring the contracting officer to determine whether a 
document is facially valid is not helpful unless we define facial 
validity.
    The proposed language intends to establish a simple dichotomy--
     Where an attorney-in-fact has signed the bid bond, the 
bidder must provide a signed and dated power of attorney to evidence 
the attorney-in-fact's authority to bind the surety; failure to provide 
a power of attorney renders the bid non-responsive;
     Any and all questions regarding the authenticity and 
enforceability of the power of attorney are not matters of 
responsiveness and, as such, shall be handled by the contracting 
officer after bid opening when he/she can seek clarification from the 
surety.
    Finally, the bidder cannot be said to have an unfair opportunity to 
improve its bid when it is only the surety, not the bidder, that can 
vouch for the authenticity of a power of attorney. Paragraph (e) has 
been added to FAR 28.101-3 clarifying that in those circumstances where 
a surety rejects a power of attorney as invalid, the bidder may not 
substitute a new surety.

    Comment: Several comments asked for clarification that modern forms 
of signatures and dates (i.e. digital, mechanically applied, or 
printed), in addition to facsimiles, be accepted as valid.

    Response: The Councils have determined it appropriate to adopt 
language listing, with greater specificity than was provided in the 
original proposal, ``electronic, mechanically-applied and printed 
signatures, seals, and dates'' as acceptable evidence of authority to 
bind the surety. The Councils believe these terms are broad enough to 
encompass present practices within the surety industry, particularly 
because a broad consortium of surety associations suggested the 
language. As such, we find it would be redundant to include ``digital'' 
within the list.

    Comment: There should be a revision to require powers of attorney 
to include notarized signatures and the contact information for the 
signers and the notary in order to authenticate the power of attorney.

    Response: The Councils do not agree. First, it detracts from the 
two-part rule established by the proposed language to identify specific 
requirements for powers of attorney. Second, while the comment is well 
taken and a requirement for contact information would prove helpful to 
the contracting officer, such detailed directions are not appropriate 
for a FAR provision.

    Comment: Representatives from the surety industry submitted a 
three-part comment as follows:
    1. The sureties recommend certain additions and deletions of commas 
in paragraph (b), which would clarify that ``original'' modifies 
``power of attorney'' and that original powers of attorney, photocopied 
original powers of attorney, and facsimile copied original powers of 
attorney are all acceptable means of establishing an attorney in fact's 
authority.
    2. The sureties recommend removing the signature and date of the 
power of attorney as matters of responsiveness in paragraph (c)(1), 
alleging that this would undercut the goal of avoiding situations where 
a low bid must be rejected simply based on formatting errors. The 
sureties note that FAR 28.101-4(c)(7) and (8) require an agency to 
waive the fact that a bid bond itself was not signed, dated, or 
erroneously dated.
    3. The sureties recommend a new paragraph (d) to clarify that a 
``printed'' power of attorney is an ``original'' and that a photocopied 
or facsimile copied copy of a ``printed'' power of attorney is also 
acceptable. The sureties suggest this clarification is necessary 
because FAR part 2 does not define ``original'' and the All Seasons 
decision called into question the reliability of a printed power of 
attorney because the contracting officer could not be certain whether 
the signature had been applied before or after printing. FAR part 2 
should be revised to include a broader definition of ``facsimile'' and 
a definition of ``original.'' Because the proposed revision is intended 
to remove the confusion created by the All Seasons reasoning, the 
sureties suggest further clarifying that printed or mechanically-
applied signatures, dates, and seals are acceptable without regard to 
the order in which they are affixed. The sureties also note that 
printed documents with printed signatures and seals are widely accepted 
as originals in commercial practice.

    Response: 1. The Councils agree that the suggested comma placement 
clarifies that original powers of attorney, as well as photocopies of 
originals and facsimiles of originals, are all acceptable as evidence 
of authority to bind the surety. It also clarifies that a photocopy of 
a non-original is not acceptable.
    2. The Councils are concerned that removing the text ``signed and 
dated'' would harm the integrity of the procurement process. Making the 
lack of a signature and date an issue of responsibility would mean they 
could be added after bid opening and a document that was not otherwise 
legally sufficient could be made so. The Councils feel a signature and 
date are so fundamental to the document that they must be present at 
bid opening. However, the rule does state that any questions regarding 
the authenticity of signature(s) and date(s) on the power of

[[Page 57461]]

attorney are treated as matters of responsibility and, therefore, can 
be addressed after bid opening.
    The Councils note the sureties cite FAR 28.101-4(c)(7) and (8) in 
support of their position; however, we distinguish that the FAR also 
makes clear that in order for the contracting officer to waive the lack 
of an offeror's signature and date on the bid bond, the bond must 
otherwise be acceptable. It is our reading that this would mean the 
bond must bear the signature of the surety or its representative and 
that all related documents, including any power of attorney, must be 
acceptable. It is not incongruous to require a signature and date on 
the power of attorney and we, therefore, retain the stated language in 
the proposed rule.
    3. The Councils concur with the suggestion to add a paragraph 
detailing those means of applying signatures and dates that are 
commonly acceptable as ``original'' in commercial practice. We accept 
the clarification in the interest of partnering with the surety 
industry to achieve a rule that works well for both sureties and 
contracting officers. It is the intent of the proposed rule to come to 
a resolution that is consistent with sureties' commercial practices and 
protections, while ensuring the Government can accept the lowest bid, 
confident that the bid bond binds the surety. The revision clarifies 
the undoing of the GAO-made rule requiring signatures and dates to be 
applied after the power of attorney is printed. This ``wet signature'' 
requirement is the most onerous and unworkable aspect of the All 
Seasons holding. As revised, a power of attorney with signatures and 
dates applied electronically and printed at the time the hard copy 
document is generated is clearly acceptable, as was intended by the 
original proposal.
    The Councils considered all comments before agreeing to convert 
this FAR case from a proposed rule to a final rule with changes.
    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601 et seq. applies to 
this final rule. The Councils prepared a Final Regulatory Flexibility 
Analysis (FRFA), and it reads as follows:

Final Regulatory Flexibility Analysis

FAR Case 2003-029

Powers of Attorney for Bid Bonds

    This Final Regulatory Flexibility Analysis has been prepared 
consistent with 5 U.S.C. 604.
    1. Reasons for the action.
    This FAR case was initiated at the request of the Office of 
Federal Procurement Policy to resolve controversy relating to the 
standards for powers of attorney accompanying bid bonds.
    2. Objectives of, and legal basis for, the action.
    The objective of this final rule is to establish clear and 
uniform standards for powers of attorney accompanying bid bonds 
which will allow the contracting officer to make more informed 
decisions that are in the best interest of the Government.
    3. Summary of significant issues raised by the public comments 
in response to the Initial Regulatory Flexibility Analysis (IRFA), a 
summary of the assessment of the agency of such issues, and a 
statement of any changes made in the proposed rule as a result of 
such comment.
    There were no specific public comments that addressed the IRFA.
    4. Description of, and, where feasible, estimate of the number 
of small entities to which the final rule will apply.
    This final rule applies to all small entity bidders involved in 
Federal acquisitions that require bid bonds. It also applies to 
small entities who are sureties and attorneys-in-fact.
    5. Description of projected reporting, recordkeeping, and other 
compliance requirements of the final rule.
    This rule will have a beneficial impact on small entities, 
including small businesses within the surety industry, because the 
rule will amend the Federal Acquisition Regulation to change from 
the current structured process to a process that is used by the 
surety industry. These commercial practices are used by the surety 
industry when doing non-Government work and small businesses are 
familiar with these practices. By allowing commercial practices, the 
current costly and unworkable requirements are eliminated, which 
removes the burden from small businesses when doing business with 
the Government.
    The intent of this rule is to establish clear and uniform 
standards for powers of attorney accompanying bid bonds that are in 
the best interest of both the Government and industry. This rule 
removes the matter of authenticity and enforceability of powers of 
attorney from a contracting officer's responsiveness determination, 
which is based solely on documents available at the time of bid 
opening. Instead, the rule instructs contracting officers to address 
these issues after bid opening. From the public comments received, 
this rule is deemed valuable because the changes being made to the 
process will guarantee that bidders will no longer be thrown out of 
the acquisition process prematurely when there is a question of 
validity. The rule changes are beneficial for all involved in the 
acquisition process.
    The final rule does not impose any new reporting, recordkeeping, 
or other information collection requirements. It will reduce the 
information collection requirement by simplifying the standards for 
an acceptable evidence of power of attorney in support of a bid 
bond.
    6. Relevant Federal rules which may duplicate, overlap, or 
conflict with the rule.
    This final rule does not duplicate, overlap, or conflict with 
other relevant Federal rules.
    7. Significant alternatives to the proposed rule which 
accomplish the stated objectives of applicable statutes and which 
minimize any significant economic impact of the proposed rule on 
small entities.
    There were no significant alternatives to the proposed rule, 
which accomplish the stated objectives. This rule will have a 
beneficial impact on small entities, which are bidders in Federal 
acquisitions that require bid bonds, as well as the associated 
sureties and attorneys-in-fact.

    Interested parties may obtain a copy of the FRFA from the FAR 
Secretariat. The FAR Secretariat has submitted a copy of the FRFA to 
the Chief Counsel for Advocacy of the Small Business Administration.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose information collection requirements that require 
the approval of the Office of Management and Budget under 44 U.S.C. 
3501 et seq.

List of Subjects in 48 CFR Parts 19 and 28

    Government procurement.

    Dated: September 22, 2005.
Julia B. Wise,
Director, Contract Policy Division.

0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 19 and 28 as set forth 
below:
0
1. The authority citation for 48 CFR parts 19 and 28 continues to read 
as follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 19--SMALL BUSINESS PROGRAMS


19.602-1  [Amended]

0
2. Amend section 19.602-1 in the parenthetical in the introductory text 
of paragraph (a) by adding ``, but for sureties see 28.101-3(f) and 
28.203(c)'' after the word ``subcontracting''.

PART 28--BONDS AND INSURANCE

0
3. Revise section 28.101-3 to read as follows:

[[Page 57462]]

28.101-3  Authority of an attorney-in-fact for a bid bond.

    (a) Any person signing a bid bond as an attorney-in-fact shall 
include with the bid bond evidence of authority to bind the surety.
    (b) An original, or a photocopy or facsimile of an original, power 
of attorney is sufficient evidence of such authority.
    (c) For purposes of this section, electronic, mechanically-applied 
and printed signatures, seals and dates on the power of attorney shall 
be considered original signatures, seals and dates, without regard to 
the order in which they were affixed.
    (d) The contracting officer shall--
    (1) Treat the failure to provide a signed and dated power of 
attorney at the time of bid opening as a matter of responsiveness; and
    (2) Treat questions regarding the authenticity and enforceability 
of the power of attorney at the time of bid opening as a matter of 
responsibility. These questions are handled after bid opening.
    (e)(1) If the contracting officer contacts the surety to validate 
the power of attorney, the contracting officer shall document the file 
providing, at a minimum, the following information:
    (i) Name of person contacted.
    (ii) Date and time of contact.
    (iii) Response of the surety.
    (2) If, upon investigation, the surety declares the power of 
attorney to have been valid at the time of bid opening, the contracting 
officer may require correction of any technical error.
    (3) If the surety declares the power of attorney to have been 
invalid, the contracting officer shall not allow the bidder to 
substitute a replacement power of attorney or a replacement surety.
    (f) Determinations of non-responsibility based on the 
unacceptability of a power of attorney are not subject to the 
Certificate of Competency process of subpart 19.6 if the surety has 
disavowed the validity of the power of attorney.
[FR Doc. 05-19474 Filed 9-29-05; 8:45 am]
BILLING CODE 6820-EP-S