TITLE: Armstrong Elevator Company, B-292864.2, April 13, 2004
BNUMBER: B-292864.2
DATE: April 13, 2004
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Armstrong Elevator Company, B-292864.2, April 13, 2004
Decision
Matter of: Armstrong Elevator Company
File: B-292864.2
Date: April 13, 2004
Roy S. Armstrong for the protester.
Mark R. Warnick, Esq., General Services Administration, for the agency.
Katherine I. Riback, Esq., and David A. Ashen, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
In a sealed bid procurement which required the submission of a bid
guarantee in the amount of 20 percent of the bid price, agency properly
rejected protester*s bid as nonresponsive, where the bid included a bid
guarantee that stated that the penal sum amount was limited to 20 percent
of the bid price, but the liability limit of the surety was limited to an
amount that was significantly less than 20 percent of the bid price.
DECISION
Armstrong Elevator Company protests the rejection of its low bid as
nonresponsive under invitation for bids (IFB) No. GS06P03GYC0014, issued
by the General Services Administration (GSA) for elevator modernization in
a federal building in Des Moines, Armstrong*s bid was found nonresponsive
due to a defective bid bond. Armstrong contends that its bid bond
contained an obvious typographical error that should have been waived by
the agency.
We deny the protest.
The IFB provided for award of a fixed-price contract, for a base year and
three 1‑year options, for the performance of elevator
modernization. Bidders were required to submit a bid guarantee with their
bids in the amount of 20 percent of the *bid price* or $3 million,
whichever was less. The solicitation provided that failure to provide a
bid guarantee in the required form and amount, by the time set for bid
opening, could be cause for the rejection of the bid. IFB at 11. The
agency received five bids in response to the solicitation. The bids of
the first and second low apparent bidders were determined to be
nonresponsive. The next low apparent bid, submitted by Armstrong, was for
a total bid amount of $1,750,000.
Upon review of Armstrong*s bid, however, the agency noticed that while the
bid bond submitted as Armstrong*s guarantee stated that the *penal sum* of
the bond was *20%,* the requisite amount, the *liability limit* specified
for the listed corporate surety was only *$44,425,* an amount
significantly lower than the required 20 percent ($350,000) of the total
bid price. Armstrong Bid, Standard Form 24, Bid Bond. The agency then
rejected Armstrong*s bid as nonresponsive for failure of the bid bond to
comply with the essential requirements of the solicitation. Subsequently,
by letter dated January 6, Armstrong furnished a *corrected* bid bond in
which the surety*s liability limit was specified as $21,859,000. The
agency nevertheless made award to Mid-American Elevator Company, at a
total bid price of $2,053,354, and this protest to our Office followed.
Armstrong contends that the liability limit of only $44,425 in the bid
bond as initially submitted was a typographical error that should have
been waived by the agency as a minor informality, thereby avoiding the
government the higher cost associated with the next highest bid.
A bid guarantee is a form of security ensuring that a bidder will, if
required, execute a written contract and furnish payment and performance
bonds. Federal Acquisition Regulation (FAR) S: 28.001; American Artisan
Prods., B-292380, July 30, 2003 CPD P: 132 at 4. 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.
Paradise Constr. Co., B-289144, Nov. 26, 2001, 2001 CPD P: 192 at 2. When
required by a solicitation, a bid guarantee is a material part of the bid
and a valid guarantee must be furnished with the bid in order for it to be
responsive. Hugo Key & Son, Inc.; Alco Envtl. Servs., Inc., B-251053.4,
B-251053.5, July 15, 1993, 93-2 CPD P: 21 at 3, aff*d, B‑251053.6,
Sept. 27, 1993, 93-2 CPD P: 192. Where the liability limit of the surety,
as specified in the bid bond, is less than the penal sum required by the
IFB, the bid should be rejected as nonresponsive, unless the waiver
provisions of FAR S: 28.101-4(c) are applicable. Wagner Moving and
Storage, B-185725, Apr. 8, 1976, 76-1 CPD P: 237; see Professional
Restoration Servs., Inc., B-232424, Jan. 9, 1989, 89-1 CPD P: 13 at 2.
The test in these cases is whether the government can enforce the bond
against the surety in the event the bidder fails to execute the required
contract documents and deliver the required bonds. Professional
Restoration Servs., Inc., supra. We find that because the liability limit
specified was inconsistent with, and for a sum less than, the penal sum
required by the IFB, Armstrong*s bid guarantee was, at best, ambiguous
concerning the enforceable amount of the bid guarantee. Wagner Moving and
Storage, supra (bid is nonresponsive where bid bond included the penal sum
specified by the IFB, but surety*s liability limitation was limited to an
amount less than that required by the IFB); cf. Professional Restoration
Servs., Inc., supra (bid bond is enforceable against a corporate surety
that specifies an intent to be bound to the penal sum by correctly
completing the liability limit portion of the bid bond form, even though
the penal sum was left blank).[1] Since none of the waiver provisions in
FAR S: 28.101-4(c) were applicable, we find that the agency properly
rejected Armstrong*s bid as nonresponsive.
Armstrong*s later submission of a *corrected* bid bond raising the
surety*s liability limit does not alter the fact that the bid was
nonresponsive. The determination as to whether a bid is acceptable must
be based solely on the bid documents themselves, as they appear at the
time of bid opening. Drill Constr. Co., Inc., B-239783, June 7, 1990,
90-1 CPD P: 538 at 2. Thus, the offer after bid opening to change the
surety*s liability limit could not cure the defect.
As for Armstrong*s assertion that the agency would realize a significant
cost savings with the acceptance of its bid, notwithstanding the defective
bid bond, we note that the public interest in strictly maintaining the
sealed bidding procedures required by law outweighs any monetary advantage
which the government might gain in a particular case by a violation of
those procedures. Cherokee Enters., Inc., B-252948, B-252950, June 3,
1993, 93-1 CPD P: 429 at 4.
The protest is denied.
Anthony H. Gamboa
General Counsel
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[1] Armstrong notes that the total underwriting limitation of its surety
is $21,859,000, as shown in the publicly available Department of the
Treasury*s Listing of Approved Sureties (Department Circular 570). The
protester contends that the total underwriting sum of its surety should
take precedence over the amount that the surety listed as its liability
limitation for this bid. However, whatever the total underwriting
limitation of Armstrong*s surety, the bid bond that was submitted with
Armstrong*s bid and which referenced the specific solicitation here
specified that the maximum liability of the surety under this solicitation
was only $44,425; while the surety could have accepted a higher potential
liability with respect to this particular solicitation, the bid bond
submitted with Armstrong*s timely bid indicated that it did not.