TITLE: B-299338, Vaden Industries, Inc., March 5, 2007
BNUMBER: B-299338
DATE: March 5, 2007
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B-299338, Vaden Industries, Inc., March 5, 2007

   Decision

   Matter of: Vaden Industries, Inc.

   File: B-299338

   Date: March 5, 2007

   Len Vaden, for the protester.

   Alton E. Woods, Esq., and Emily E. Parkhurst, Esq., Department of the
   Interior, for the agency.

   Jonathan L. Kang, Esq., and Glenn G. Wolcott, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest challenging solicitation performance and payment bond requirements
   is denied where agency's need for such requirements is reasonably
   supported by the record.

   DECISION

   Vaden Industries, Inc. protests the terms of request for proposals (RFP)
   No. N8147070010, issued by the Department of the Interior, National Park
   Service (NPS), for facility maintenance services on Alcatraz Island. The
   protester contends that the RFP's requirements for performance and payment
   bonds violate the Federal Acquisition Regulation (FAR), and result in an
   unreasonable limit on the scope of the competition.

   We deny the protest.

   The NPS administers Alcatraz Island, a 12-acre island in the San Francisco
   Bay whose former uses include a lighthouse, a military base, and a federal
   prison, and which is now part of the Golden Gate National Recreation Area.
   The Island is open to the public and receives over 1.3 million visitors
   per year, with daily visits often exceeding 5,000 persons per day. Access
   to the Island for visitors and the approximately 50-85 government and
   contractor staff who work on the Island on a daily basis is provided by
   boats.

   The RFP contemplates award of a fixed-price contract, with a 1-year base
   performance period and four 1-year option periods. The RFP sought
   proposals to provide personnel, equipment, tools, materials, supplies,
   supervision, and other items and services necessary to perform facility
   maintenance services on the Island. The contractor will be required to
   maintain restrooms, waste handling and sewage systems including off-island
   removal/delivery, fire suppression systems, electrical generation systems,
   and drinking water systems, and provide fuel delivery.

   As relevant here, the successful offeror will be required to provide the
   government prior to contract performance a performance bond equal to 100
   percent of the contract value, and a payment bond equal to 100 percent of
   the contract value. Additionally, offerors are required to submit with
   their proposals a bid guarantee equal to the lesser of 25 percent of the
   proposed price or $1 million.

   The protester primarily challenges the solicitation's requirement for the
   payment and performance bonds.[1] An agency has the discretion to impose
   bond requirements for non-construction contracts in appropriate
   circumstances as a necessary and proper means to secure fulfillment of the
   contractor's obligations. See FAR sections 28.103-2, 28.103-3. In
   reviewing the bond requirements contained in a particular solicitation, we
   look only to see if they are reasonably imposed. NVT Techs., Inc.,
   B-292302.3, Oct. 20, 2003, 2003 CPD para. 192 at 4.

   Specifically, the protester contends that the FAR does not permit the
   agency to impose the bond requirements identified in the solicitation
   under the circumstances of this procurement. The FAR states that
   "[g]enerally, agencies shall not require performance and payment bonds for
   other than construction contracts. However, performance and payment bonds
   may be used as permitted in 28.103-2 and 28.103-3." FAR sect. 28.103-1(a).
   The FAR provides the following guidance for use of performance bonds in
   non-construction contracts:

     (a) Performance bonds may be required for contracts exceeding the
     simplified acquisition threshold when necessary to protect the
     Government's interest. The following situations may warrant a
     performance bond:

     (1) Government property or funds are to be provided to the contractor
     for use in performing the contract or as partial compensation (as in
     retention of salvaged material).

     (2) A contractor sells assets to or merges with another concern, and the
     Government, after recognizing the latter concern as the successor in
     interest, desires assurance that it is financially capable.

     (3) Substantial progress payments are made before delivery of end items
     starts.

     (4) Contracts are for dismantling, demolition, or removal of
     improvements.

   FAR sect. 28.103-2.

   Additionally, FAR sect. 28.103-3 requires a payment bond when a contract
   requires a performance bond, and the use of a payment bond is in the
   government's interest.

   The protester argues that FAR sect. 28.103-2(a) limits agencies' use of
   performance bonds to the four cited examples that "may" warrant use of
   performance and payment bonds. Here, the agency acknowledges that "none of
   the 4 examples provided are applicable to this acquisition." Contracting
   Officer's Statement at 4. Our Office, however, has recognized that the
   four examples are a non-exclusive list and there may be other
   circumstances where the requirement is reasonable. Apex Support Servs.,
   Inc., B-288936, B-288936.2, Dec. 12, 2001, 2001 CPD para. 202 at 2; see
   also RCI Mgmt., Inc., B-228225, Dec. 30, 1987, 87-2 CPD para. 642 at 2.

   The agency states that the bond requirements are necessary for the
   following reasons:

     As a result of its location, Alcatraz Island is deemed to be a remote
     site, and as such, delivery of services in an efficient, uninterrupted
     manner is of great importance, both for staff on the Island and for the
     visiting public. The maintenance and operation of adequate sanitation
     facilities, the drinking water system, and the electrical system is
     extremely critical, and may not be allowed to lapse. Prior to issuance
     of the current solicitation . . . a determination to require performance
     and payment bonds was made in an effort to protect the government's
     interest in assuring efficient and uninterrupted service in the event
     the selected contractor experienced difficulties.

   Contracting Officer's Statement at 4-5.

   An agency's reasonable determination that obtaining uninterrupted services
   is necessary to ensure continuing operations is a sufficient basis for
   requirement of performance and payment bonds. TLC Servs., Inc., B-255758,
   Mar. 28, 1994, 94-1 CPD para. 217 at 4. Here, the protester has not
   identified a reasonable basis to challenge the agency's determination that
   a performance bond was required to protect the government's interests.

   The protester next challenges the amount of the bond requirements, arguing
   that 100% bond requirements are neither in good faith nor in the best
   interest of the government. There is, however, nothing inherently
   unreasonable regarding a 100% performance bond. NVT Techs., Inc., supra,
   at 5. As discussed above, the agency has reasonably identified its
   rationale for the bond requirements.

   Finally, the protester argues that the bond requirements will limit
   competition because Vaden, a small business, will not be able to meet
   those requirements. As our Office has held, however, the fact that a bond
   requirement may limit competition and even effectively preclude some small
   businesses from submitting proposals, does not, on its own, render a bond
   requirement improper.[2] Id.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] The protester also challenges the bid guarantee requirement. The
   protester, however, does not set forth a specific challenge to the bid
   guarantee, aside from arguing that the cumulative effects of the bid
   guarantee and performance and payment bonds may unreasonably limit
   competition. As discussed below, we find no basis to sustain any of the
   protester's challenges to the solicitation.

   [2] We note that this procurement was not restricted to small business
   offerors.