Government Contracts Monitor

Include Original Bid Guarantees with Your Bid or be Excluded

September 23, 2014

By: Eric Whytsell

In the recent case of Hamilton Pacific Chamberlain, LLC, B-409795 (August 11, 2014), interesting facts concerning a bid guarantee resulted in a robust analysis by the Government Accountability Office (GAO). But in the end the GAO reiterated a long-standing rule: Where an invitation for bids (IFB) requires submission of a bid guarantee, a bidder’s failure to submit an original bid guarantee at bid opening renders the bid nonresponsive and the agency cannot waive the failure as a minor informality.

The procurement in question was a service-disabled, veteran-owned small business (SDVOSB) set-aside for a Department of Veterans Affairs (VA) Medical Center. The VA received nine bids in response to its IFB, including those from Utility Systems Solutions, Inc. (US2) and Hamilton Pacific Chamberlain, LLC (HPC), the second and third lowest bids, respectively.

When the lowest bid was rejected because the bidder was not listed in the VA’s Vendor Information Pages database as a verified and eligible SDVOSB firm, the contracting officer (CO) next considered US2’s bid. US2 had submitted an original bid and a copy, as required by the IFB. However, the CO reviewed the original bid and rejected it because it did not include a bid guarantee. US2 protested to the agency, (i) pointing out that the copy of its bid contained a copy of its bid guarantee with an attached power of attorney and (ii) providing the original bid guarantee, which it claimed had been inadvertently omitted from its original bid. The VA upheld the protest concluding that failure to provide an original bid guarantee should be considered a minor informality that US2 cured after bid opening.

Upon hearing of that decision, HPC protested to the GAO, arguing that US2’s bid was nonresponsive because it contained only a copy of the bid guarantee.

The GAO opened its analysis by noting that a bid guarantee is a material condition of an IFB, noncompliance with which at bid opening generally renders the bid nonresponsive and requires its rejection. In addition, the sufficiency of a bid guarantee turns on whether the surety is clearly bound by its terms. For a bid guarantee to be enforceable, the surety must be clearly bound based on the information in the CO’s possession at the time of bid opening.

The question became whether a copy of the original bid guarantee was sufficient to meet the IFB requirement.

As the GAO explained, the answer is “no”: The purpose of a bid guarantee is to ensure that the agency has a surety “on the hook” in case the bidder cannot perform. When the agency receives a copy of a bid guarantee, it must refer to the original document after bid opening in order to determine whether or not there have been any alterations to the bid guarantee to which the surety had not consented – and which it could use to disclaim liability. Because it cannot make that determination at the time of bid opening, the agency cannot treat the submission of a copy of the bid guarantee as a correctable minor informality. Nor can the defect “be cured by the submission of the original bond after bid opening because this would essentially provide the bidder with the option of accepting or rejecting the award by either correcting or not correcting the bond deficiency, which is inconsistent with the concept of procuring using sealed bids.“

Although the GAO’s published decision invites the FAR Councils to consider amending the regulations to establish a different rule concerning the use of a facsimile bid guarantee, bidders are advised to simply avoid the issue altogether. When preparing bids, double and triple check that your submission contains all the required elements, especially an original copy of the bid guarantee.

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