Construction Contractors Need to be Wary When Not Using Standard Government Bond Forms
Published Date: October 16, 2018
Contractors who do business with the Federal Government know that the Federal Government uses a number of standard forms. While the use of a standard form is not always mandatory, a recent GAO case demonstrates the risk a contractor might assume when not using standard forms.
In G2G, LLC, B-416502, 2018 WL 4679148 (Sept. 27, 2018), GAO upheld that agency’s rejection of the contractor’s low bid as nonresponsive for failure to submit a valid bid bond. As the Bid Guarantee clause, FAR 52.228-1, states, failure to furnish a bid guarantee in the proper form and amount can result in rejection of the bid. In this case, the contractor submitted its bid bond using an American Institute of Architects (“AIA”) form instead of the FAR Standard Form (“SF”) 24 bid bond. The language of the AIA form differed from the SF 24 with regard the extent of the surety’s liability in the event of default. Specifically, the Contracting Officer found that the AIA form did not clearly obligate the surety to cover all excess costs of reprocurement in the event of default as required by FAR 52.228-1(e).
The Contracting Officer rejected the contractor’s bid and the contractor filed a protest with GAO. GAO held that contractors may use commercial bid bond forms as long as those bond forms do not significantly depart from the rights and obligations of the parties as set forth in SF 24. GAO stated that the determinative question is whether the bond establishes unequivocally at the time of bid opening that the bond is enforceable against the surety should the bidder fail to meet its obligations. If the agency cannot determine definitively from the bid bond documents that the surety would be bound, the bond is defective, and the bid must be rejected. GAO agreed with the Contracting Officer that the contractor’s bid bond did not provide clear or unambiguous evidence of the contractor’s intent to incorporate by reference the solicitation requirements for a bid guarantee, including the requirements of FAR 52.228-1. Therefore, GAO denied the protest.
Contractors need to keep in mind that bid bonds are a material condition of the solicitation and the bid bond submitted by the contractor with its bid must be in compliance at the time of bid opening. Noncompliance renders the bid nonresponsive and requires rejection of the bid. Other ways a bid bond may be considered defective and result in the rejection of the bid including:
• Not including the penal sum on the bid bond.
• Having a penal sum that is less than the sum required by the solicitation and the requirement is not waived in accordance with FAR 28.101-4(c).
• Using the wrong solicitation number and wrong bid opening date on the bid bond.
• Having a principal named on the bid bond who is not the same entity as that identified in the bid.