TITLE: B-297115, Johnson Machine Works, Inc., October 20, 2005
BNUMBER: B-297115
DATE: October 20, 2005
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B-297115, Johnson Machine Works, Inc., October 20, 2005

   Decision

   Matter of: Johnson Machine Works, Inc.

   File: B-297115

   Date: October 20, 2005

   Steven L. Briggerman, Esq., Grace Bateman, Esq., John T. Bergin, Esq., and
   Jamison L. Weinbaum, Esq., Seyfarth Shaw LLP, for the protester.

   David J. Buono, Esq., Dunn Carney Allen Higgins & Tongue LLP, for Oregon
   Iron Works, Inc., an intervenor.

   William A. Lubick, Esq., Army Corps of Engineers, for the agency.

   Louis A. Chiarella, Esq., and Christine S. Melody, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Where corporate surety's power of attorney form attached to bid bond
   failed to designate the individual who signed the bond on behalf of the
   surety as an attorney-in-fact authorized to bind the surety, contracting
   agency properly determined the bond was defective and the bid
   nonresponsive because it is not clear whether the surety would be bound.
   Evidence of the authority of surety's agent to sign bid bond on behalf of
   the surety must be furnished with a bid prior to bid opening, and failure
   to furnish it renders the bid nonresponsive.

   DECISION

   Johnson Machine Works, Inc. (JMW) protests the rejection of its low bid
   under invitation for bids (IFB) No. W911WN-05-B-0004, issued by the Army
   Corps of Engineers, Department of the Army, for work on the Emsworth Locks
   and Dams, located on the Ohio River in western Pennsylvania. The Corps
   rejected JMW's bid because the surety's power of attorney attached to the
   bid bond failed to designate the individual who signed the bond on behalf
   of the surety as an attorney-in-fact authorized to bind the surety.

   We deny the protest.

   The IFB, issued on July 22, 2005, sought the fabrication and delivery of
   two vertical lift gates as part of the rehabilitation project of the
   Emsworth Locks and Dams, to be performed within 180 calendar days after
   receipt of the Notice to Proceed. The IFB required each bidder to submit
   with its bid a bid guarantee (e.g., a bid bond supported by good and
   sufficient surety or sureties, postal money order, certified check, or
   cashier's check) in the amount of 20 percent of the bid price or $3
   million, whichever was less. IFB sect. I-4. With regard to a bidder's
   submission of a bid bond as its bid guarantee, the solicitation stated
   that a valid power of attorney for an individual acting as agent for the
   surety shall accompany the bid bond, and that the failure to furnish a bid
   bond or a valid power of attorney, as specified, with the bid may result
   in rejection of the bid for noncompliance. IFB sect. L-5.

   Three bids, including the low bid of JMW, were received by the August 22
   bid opening. The Corps rejected JMW's bid as nonresponsive, however,
   having determined that the bid guarantee was improper. Specifically, JMW's
   bid was accompanied by a bid bond that listed JMW as principal and
   Employers Mutual Casualty Company (EMC) as corporate surety. In the space
   provided for the surety, the bid bond contained the signature of David L.
   Hixenbaugh, who was identified as "attorney-in-fact" on behalf of the
   surety.[1] Agency Report (AR), Tab 4, JMW Bid, at 16. Included with JMW's
   bid bond was a power of attorney, signed by the surety's president,
   authorizing specific individuals (Sue A. Allen and Bruce D. Kingsbury) to
   bind the surety; the power of attorney, however, did not name Mr.
   Hixenbaugh as being authorized to bind the surety.[2] Id. at 18. The
   contracting officer determined that the liability of the surety on JMW's
   bid bond was uncertain, because there was no evidence to show that Mr.
   Hixenbaugh was an attorney-in-fact or was otherwise authorized to sign the
   bond on behalf of the surety. AR at 3. This protest followed.

   JMW argues that the agency should not have rejected its bid because the
   bid bond was valid and effective. In support thereof, JMW contends that
   the bid documents clearly established that Mr. Hixenbaugh was authorized
   to sign the bond and bind the surety. The Corps argues that the
   protester's failure to provide documentary evidence at the time of bid
   opening that Mr. Hixenbaugh was authorized to bind the surety represented
   a defect that could not be cured after bids were opened, and that the bid
   had to be rejected as nonresponsive.

   A bid bond is a form of security that ensures that a bidder will not
   withdraw its bid within the period specified for acceptance and, if
   required, will execute a written contract and furnish required performance
   and payment bonds. See FAR sect. 28.001. The purpose of a bid bond is to
   secure the liability of a surety to the government for excess
   reprocurement costs in the event the successful bidder defaults by failing
   to execute the necessary contractual documents or to furnish the required
   payment and performance bonds. See FAR sect. 52.228-1(d), (e); Mars Elec.
   Inc., B-245192,  Aug. 23, 1991, 91-2 CPD para. 195 at 2. The sufficiency
   of a bid bond depends on whether the surety is clearly bound by its terms;
   when the liability of the surety is not clear, the bond is defective. E&R,
   Inc., B-255868, Mar. 29, 1994, 94-1 CPD para. 218 at 3. The reason for
   this is that under the law of suretyship no one can be obligated to pay
   the debts or to perform the duties of another unless that person has
   expressly agreed to be bound. Andersen Constr. Co.; Rapp Constructors,
   Inc., B-213955,

   B-213955.2, Mar. 9, 1984, 84-1 CPD para. 279 at 4.

   When required by a solicitation, a bid bond or other bid guarantee is a
   material part of the bid, noncompliance with which renders the bid
   nonresponsive and generally requires rejection of the bid. FAR sect.
   28.101-4(a); Nova Group, Inc., B-220626, Jan. 23, 1986, 86-1 CPD para. 80
   at 2. This is because permitting correction of a bid guarantee after bid
   opening would open the door to manipulation of the competitive bidding
   system by permitting a bidder to decide after other bids have been exposed
   whether to attempt to have its bid accepted or rejected. Trans South
   Indus., Inc., B-224950, Dec. 19, 1986, 86-2 CPD para. 692 at 2.

   A bid bond submitted with an invalid power of attorney certificate renders
   the bid nonresponsive.[3] See, e.g., Big River Constr. Co., B-250961, Oct.
   26, 1992, 92-2 CPD para. 283 at 2; Techno Eng'g & Constr., Ltd., B-243932,
   July 23, 1991, 91-2 CPD para. 87 at 2-3. This is so because a power of
   attorney authorizes an agent to act for the surety and only a valid power
   of attorney would indicate that the surety expressly agreed to be bound to
   pay the bond signed by the attorney-in-fact. E&R, Inc., supra, at 4. A
   power of attorney is to be strictly construed. The surety's power of
   attorney must establish unequivocally that the individual who signed the
   surety's bond was authorized to bind the surety, and we will not convert
   ambiguous aspects of powers of attorney into mere matters of form which
   can be explained away and waived. Id.

   Here, the surety's power of attorney attached to the bond listed only Ms.
   Allen and Mr. Kingsbury as attorneys-in-fact authorized to bind EMC, and
   did not also list Mr. Hixenbaugh, the individual who signed the bond as
   attorney-in-fact on behalf of the surety. The failure of EMC's power of
   attorney to list Mr. Hixenbaugh thus created an uncertainty as to whether
   Mr. Hixenbaugh was duly authorized to bind EMC, thereby rendering the bond
   defective and JMW's bid nonresponsive under the regulations then in
   effect. See Techno Eng'g & Constr., Ltd., supra.

   JMW does not dispute that its bid bond identified Mr. Hixenbaugh as
   attorney-in-fact on behalf of the surety, while the accompanying power of
   attorney failed to list Mr. Hixenbaugh as an attorney-in-fact for EMC.[4]
   Nonetheless, JMW argues that it submitted a valid bid bond with its bid,
   the rejection of which by the agency was improper. In support thereof JMW
   contends that the bid documents establish that Mr. Hixenbaugh was a vice
   president of EMC, that as a vice president of the surety Mr. Hixenbaugh
   had the legal authority to bind EMC on bid bonds (as well as the authority
   to appoint attorneys-in-fact on behalf of the surety), and that his
   signature on the bid bond did in fact bind EMC as surety. Protest at 5-6.

   Whether Mr. Hixenbaugh had actual authority to bind the surety is not
   dispositive; rather, the issue is whether it appeared from the face of the
   bid documents that Mr. Hixenbaugh's signature on behalf of the surety was
   authorized and binding. See Techno Eng'g & Constr., Ltd., supra, at 3. Our
   review of the power of attorney indicates only that Mr. Hixenbaugh is a
   vice president of EMC, and that EMC vice presidents have the authority to
   appoint and remove attorneys-in-fact on behalf of the surety. The power of
   attorney does not, however, as the protester represents, demonstrate that
   Mr. Hixenbaugh's position as vice president, or his authority to appoint
   attorneys-in-fact, carried with it the authority to bind the surety, and
   JMW has been unable to point to any aspect of the power of attorney which
   evidences this critical detail.[5]

   In its comments on the agency's report on the protest, the protester also
   argues that Mr. Hixenbaugh, as an officer of the surety, could execute the
   bid bond and bind the company without presenting any independent evidence
   of his or her authority to do so. Relying upon Hawaiian Dredging Constr.
   Co., Inc. v. United States, 59 Fed. Cl. 305 (2004), JMW contends that,
   under the instructions which accompanied the required bid bond form, when
   the person executing the bond on behalf of the surety is an officer of the
   surety, the individual is not required to provide any further evidence of
   his or her authority to bind the company.[6] Comments at 4-5. Thus, JMW
   argues, as Mr. Hixenbaugh was known to be an officer of the surety from
   the bid documents provided, he was not required to furnish evidence of his
   authority to sign the bond in a representative capacity. We disagree.

   The bid bond instructions state, in relevant part:

   Insert the full legal name and business address of the Principal in the
   space designated "Principal" on the face of the form. An authorized person
   shall sign the bond. Any person signing in a representative capacity
   (e.g., an attorney-in-fact) must furnish evidence of authority if that
   representative is not a member of the firm, partnership, or joint venture,
   or an officer of the corporation involved.

   IFB sect. K, Standard Form 24, Bid Bond, at 2; FAR sect. 53.301-24.

   We think that JMW's reliance on this bid bond instruction is misplaced.
   First, we think that the bond instruction here is intended to apply to the
   person signing the bond for the principal, and not the person executing
   the bond on behalf of the surety. To find otherwise as JMW suggests--that
   any member or officer of the surety need not furnish evidence of his or
   her authority to execute bonds and bind the surety--would eviscerate a
   central tenet of suretyship law, that there be an express agreement of the
   surety to be bound. See Andersen Constr. Co.; Rapp Constructors, Inc.,
   supra. In this regard, the court in Hawaiian Dredging cited the bid bond
   instruction in the context of affirming the same principle that we apply
   here, that an individual signing a document on behalf of a corporate
   surety must furnish evidence of his authority. Hawaiian Dredging Constr.
   Co., Inc. v. United States, supra, at 310. The language from the
   instruction on which JMW relies--requiring evidence of authority if the
   representative is "not a member of the firm, partnership, or joint
   venture, or an officer of the corporation involved"--simply was not at
   issue in the case. Moreover, JMW ignores the fact that the IFB here
   expressly informed bidders that "[a] valid power of attorney for an
   individual acting as agent for the surety shall accompany the bond," and
   that "[f]ailure to furnish a bid bond or a valid power of attorney, as
   specified, with the bid may result in rejection of the bid for
   noncompliance." IFB sect. L-5. In sum, we find JMW's argument that any
   officer of a surety can execute bonds and bind the surety without
   presenting any independent evidence of his or her authority to do so,
   including the signature of Mr. Hixenbaugh on the bond here, to be without
   merit.

   Lastly, the protester argues that the Corps should accept extrinsic
   evidence that Mr. Hixenbaugh was in fact authorized to sign the bid bond
   and bind EMC. We have previously, and repeatedly, rejected this argument.
   The responsiveness of a bid must be determined solely from the bid
   documents; thus, the fact that extrinsic evidence may establish that the
   individual who executed the bond on behalf of the surety was authorized to
   do so is of no consequence, notwithstanding the fact that evidence was in
   existence at the time of bid opening. See E&R, Inc., supra, at 5; Techno
   Eng'g & Constr., Ltd., supra, at 3; Baldi Bros. Constructors, B-224843,
   Oct. 9, 1986, 86-2 CPD para. 418 at 3. Quite simply, a bid which is
   nonresponsive due to the lack of an adequate bid guarantee cannot be made
   responsive by furnishing the guarantee in proper form after bid opening.
   Nova Group, Inc., supra, at 3; AVS, Inc., B-218205, Mar. 14, 1985, 85-1
   CPD para. 328 at 2. Accordingly, we find that the agency correctly
   determined that JMW's bond was defective based solely on the documents
   that JMW submitted with its bid prior to bid opening, and properly
   rejected JMW's bid as nonresponsive.

   The protest is denied.

   Anthony H. Gamboa
   General Counsel

   ------------------------

   [1] An "attorney-in-fact" means an agent, independent agent, underwriter,
   or any other company or individual holding a power of attorney granted by
   a surety. Federal Acquisition Regulation (FAR) sect. 28.001. A power of
   attorney is the authority given one person or corporation to act for and
   obligate another, as specified in the instrument creating the power. FAR
   sect. 2.101.

   [2] The power of attorney included a certification signed by Mr.
   Hixenbaugh, as EMC vice president, attesting to the authority of the
   surety's president to appoint attorneys-in-fact and declaring that the
   power of attorney appointments of the named individuals were true,
   correct, and still in full force and effect. Id. at 18.

   [3] Subsequent to the date of bid opening here, a new provision, sect.
   28.101-3, was added to the FAR, effective September 30, 2005, establishing
   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, and making questions
   concerning the authenticity and enforceability of a power of attorney at
   the time of bid opening a matter of bidder responsibility (to be handled
   after bid opening) rather than bid responsiveness. See 70 Fed. Reg. 57,459
   (Sept. 30, 2005). We note that the new regulatory provision does not
   specifically address the circumstance where, as here, the power of
   attorney submitted to evidence the attorney-in-fact's authority to bind
   the surety fails to name the attorney-in-fact. In any event, we see no
   basis to apply a provision that was not in effect at the time the
   solicitation here was issued. See FAR sect. 1.108(d)(1) (FAR changes apply
   to solicitations issued on or after the effective date of the change).

   [4] JMW contends that the surety inadvertently failed to include the power
   of attorney appointing Mr. Hixenbaugh as attorney-in-fact on behalf of EMC
   with the bid bond. Protest at 3. In an apparently contradictory statement,
   JMW also contends that Mr. Hixenbaugh mistakenly identified himself and
   erroneously executed the bid bond as attorney-in-fact rather than as a
   vice president of EMC. Protest at 4, exh. 4, Affidavit of David L.
   Hixenbaugh, at 1.

   [5] The fact that Mr. Hixenbaugh signed the bond as attorney-in-fact, and
   not as EMC vice president, further undermines the protester's assertion
   that Mr. Hixenbaugh's position as vice president automatically provided
   him with the authority to bind the surety.

   [6] In Hawaiian Dredging Constr. Co., Inc. v. United States, the Court of
   Federal Claims held that the agency unreasonably rejected a contractor's
   bids on the ground that the power of attorney appointing the
   attorney-in-fact who executed the bonds on behalf of the surety lacked
   original signatures, when the bid documents themselves unequivocally
   established the surety's intent to be bound by mechanically-applied (i.e.,
   facsimile) signatures. The Court found that while both applicable
   procurement regulations and the bid bond instructions required the person
   executing the bond on behalf of a corporate surety to furnish evidence of
   his or her authority to do so, neither required an original signature on
   the document that served as evidence of such authority (e.g., the power of
   attorney).