BNUMBER:  B-267513
DATE:  November 16, 1995
TITLE:  Harvest Construction Company

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Matter of:Harvest Construction Company

File:     B-267513

Date:     November 16, 1995

William R. Potter, Esq., and Susan W. Gowan, Esq., Potter & Taylor, 
for the protester.
Allen W. Smith, and Charles Hill, Jr., Department of Agriculture, for 
the agency.
Behn Miller, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

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  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.

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)  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  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  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  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  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  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  170.

The commercial bid bond form submitted by Harvest significantly 
deviated from the rights and obligations of the parties as set forth 
in the IFB.  The IFB incorporated FAR  52.228-1, which obligates the 
bidder to pay the government "for any cost of procuring the work which 
exceeds the amount of its bid."  If the principal fails to reimburse 
the government for all such costs, under the terms of the SF 24, the 
government can collect the remaining balance of these costs from the 
surety, up to the penal sum of the bond.  

In contrast, in the event that Harvest does not pay all costs 
associated with its default, Harvest's bid bond does not permit the 
government to pursue the surety for the remaining costs.  Whereas the 
surety's obligation under SF 24 is not extinguished until the 
principal has paid all costs, under the terms of Harvest's bid bond, 
the surety's liability is extinguished as soon as the principal pays 
costs equal to the penal amount of the bid bond.  Harvest's bid bond 
thus provides the government with less than the protection required by 
FAR  52.228-1 and set forth in the SF 24 bid bond since, in the event 
that the costs associated with contractor default exceed the penal 
amount of the bid bond, the government will not be able to proceed 
against the surety for the remaining balance.  Since Harvest's 
submitted commercial bid bond provides the government with less than 
the required protection, the contracting officer properly rejected 
Harvest's bid as nonresponsive.  See W.R.M. Constr., Inc., 69 Comp. 
Gen. 715 (1990), 90-2 CPD  227.

Harvest claims that the variance between its submitted commercial bid 
bond and the IFB's bid guarantee requirement should be waived since 
"[t]here is no reason to believe" that Harvest will not fully perform 
its contract.  When a bid is properly rejected as nonresponsive based 
on an inadequate bid bond, the defective bond may not be waived or 
corrected after bid opening; otherwise, a bidder would essentially 
have the option, after bid opening, of accepting or rejecting the 
award by either correcting or not correcting the bond deficiency, 
which is inconsistent with the sealed bidding system.[1]  See Tolman 
Building Maint., B-243654, Apr. 29, 1991, 91-1 CPD  422.

The protest is denied.

Comptroller General
of the United States

1. To the extent Harvest contends that it should be allowed to correct 
its bond because the government would save money by making award to 
it, the importance of preserving the integrity of the competitive 
bidding system outweighs the possibility that the government might 
realize monetary savings if a material deficiency in a bid is 
corrected or waived.  See Blakelee Inc., B-239794, July 23, 1990, 90-2 
CPD  65.