TITLE:  Paradise Construction Company, B-289144, November 26, 2001
BNUMBER:  B-289144
DATE:  November 26, 2001
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Decision

Matter of: Paradise Construction Company

File: B-289144

Date: November 26, 2001

Howell R. Riggs, Esq., for the protester.

Capt. Clay Robertson and John D. Inazu, Esq., Department of the Air Force,
for the agency.

Mary G. Curcio, Esq., and John M. 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 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.

DECISION

Paradise Construction Company protests the rejection of its bid under
invitation for bids (IFB) No. F12617-01-B0006, issued by the Department of
the Air Force for the sealing of four maintenance hangar roofs. Paradise
asserts that the Air Force improperly determined that its bid bond was
insufficient and that its bid therefore was nonresponsive.

We deny the protest.

The IFB, which required bidders to submit a bid guarantee, incorporated
Federal Acquisition Regulation (FAR) sect. 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 further states, at
subparagraph 1(e), as follows:

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.

In other words, the defaulting bidder is liable for reprocurement costs, and
to protect the government's interests in the event the bidder fails to pay
all those costs, the bond is to be available, up to its penal sum, to pay
the difference between the costs the defaulting bidder paid and the costs of
reprocurement.

Paradise submitted its bid bond on a commercial bid bond form that provided
as follows:

If the principal shall pay to the obligee the difference not to exceed the
penalty thereof between the amount specified in said bid and such larger
amount for which the obligee may in good faith contract with another party
to perform the work covered by said bid, then this obligation shall be null
and void, and otherwise to remain in full force and effect.

The Air Force found that the quoted language rendered the bond insufficient
because it limited the obligation of the surety to the difference between
the amount bid by Paradise and the amount of any new contract that would be
awarded in the event Paradise defaulted. Agency Request for Summary
Dismissal. It determined that this was contrary to the requirement of FAR sect.
52.228-1, which holds the defaulting contractor liable for any reprocurement
costs that the government may incur.

The bid was properly rejected as nonresponsive. A bid guarantee ensures that
a bidder will, if required, execute a written contract and furnish payment
and performance bonds. Where 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. The guarantee is also available to
offset the cost of reprocurement of the goods or services. A bid bond is
defective if it is submitted on a form that represents a significant
departure from the rights and obligations of the parties as set forth in the
IFB. Harvest Constr. Co., B-267513, Nov. 16, 1995, 95-2 CPD para. 226 at 2. If
the bid bond is defective, the bid is nonresponsive and must be rejected.
Id.

Here, the IFB required the bidder to be responsible for all reprocurement
costs in the event of default. These costs would include the difference in
the successful bidder's price and the price of any replacement contract, and
also would include, for example, administrative costs the government would
incur in reprocuring the services. The quoted language in Paradise's bond
limited the liability of the surety to the difference between the bid
submitted by Paradise and the amount of any new contract awarded for the
services. The bond therefore would not be available to offset any
administrative and other reprocurement costs, since they would be in excess
of the difference in the successful bidder's price and the reawarded
contract price. This is a significant diminution of the defaulting bidder's
and its surety's obligation under FAR sect. 52.228-1 to pay all reprocurement
costs (up to the penal

amount). See Harvest Constr. Co., supra. Consequently, the bid bond was
insufficient, and the bid was properly rejected as nonresponsive.

The protest is denied.

Anthony H. Gamboa

General Counsel