In re Clear Thru Maintenance, Inc.

• Citation: 61 Comp.Gen. 456
• Decision Date: 15 June 1982
• Docket Number: B-203608
• Parties: MATTER OF: CLEAR THRU MAINTENANCE, INC.
• Court: Comptroller General of the United States

61 Comp.Gen. 456

MATTER OF: CLEAR THRU MAINTENANCE, INC.

No. B-203608

Comptroller General of the United States

June 15, 1982

Bonds - bid - surety - more than one - net worth requirements - propriety agency's requirement that both individual sureties on a bid bond have net worths in excess of their total outstanding surety obligations in order to be deemed acceptable sureties is unobjectionable since it is reasonably related to the purpose for which a bid guarantee is intended namely, to protect the government's financial interest in the event of default on the bid. Bonds - bid - surety - affidavit (standard form 28) - deficiencies - responsiveness v. Responsibility matter questions concerning an individual surety's financial acceptability are matters of responsibility rather than responsiveness. Bonds - bid surety - unacceptable - substitutions after bid opening precluded although questions concerning an individual surety's acceptability are matters of responsibility, a bidder May not after bid opening substitute an acceptable individual surety for one deemed unacceptable because such a substitution would alter the sureties' joint and several liability under the bid bond, the principal factor in determining the bid's responsiveness to the bid guarantee requirement. Contracts - small business concerns - awards - small business administration's authority - certificate of competency - sureties on bid bonds status bidder nonresponsibility determinations based on the unacceptability of an individual surety on a required bid bond need not be referred to the small business administration (SBA) for review under the certificate of competency procedures; such determinations are based solely on the qualifications of the individual surety and there is no indication that congress intended the small business act to bring surety qualifications under the scrutiny of sba.

Clear thru maintenance, Inc. Protests the award of a contract to suburban industrial maintenance under invitation for bids (IFB) no. GS 03-81-b- 0054, issued by the general service administration (GSA) for custodial services at the social security payment center in philadelphia, Pennsylvania. The protest stems from the rejection of clear thru's bid as nonresponsive based on the financial inadequacy of one of the individual sureties listed on clear thur's bid bond. Gsa takes the position that, contrary to a number of our decisions, the question of surety acceptability relates to bid responsiveness rather than responsibility. The agency further maintains that notwithstanding whether the issue is one of responsiveness or responsibility, its method of determining the surety unacceptable was reasonable.

We agree with gsa that its evaluation of the surety's net worth was reasonable. We do not agree, however, that the issue of surety acceptability is a matter of bid responsiveness.

Clear thru submitted the low bid while suburban's bid was second low of the eleven bids opened on May 1, 1981. The solicitation required that a bid guarantee in the amount of 20 percent of the total one year bid price be submitted with each bid. Clear thru complied with this requirement submitting a bid bond listing two individual sureties. The penal amount of the bond was $83, 809.20. The affidavits of individual surety (standard form 28), completed by the sureties and furnished with the bond, indicated net worths of $468, 500 and $483, 000, respectively. Also, item 10 of the affidavits indicated that each had outstanding surety obligations of $315, 493.96.

During the preaward survey the agency reviewed clear thru's financial capability, which included examination of the information relating to the bid bond. The agency discovered that both sureties had neglected to list, under item 10 of the affidavits, certain surety obligations on other procurements. The penal amount on one of these undisclosed bonds was $160, 046.63 which, when added to one of the individual's surety obligations of $315, 493.96 listed in his affidavit, increased his total outstanding obligations above his net worth by $7, 040.59. Gsa considered this "deficit security situation" unsatisfactory.

Upon learning that the sufficiency of his net worth vis-a-vis his surety obligations was in question, the surety submitted a new bond and affidavit substituting a different surety for himself. The contracting officer refused to accept the substitution, however, based on his determination that this inadequacy of an individual surety rendered clear thru's bid bond unacceptable and its bid, thus, nonresponsive. He therefore rejected clear thru's bid by letter of May 28 and awarded the contract to suburban. Gsa reports it has subsequently learned that both the individual sureties were overextended, having pledged their net worths against at least $2, 000, 000 in undisclosed surety obligations.

Clear thru takes issue, principally, with the manner in which gsa determined the financial adequacy of its individual sureties. Specifically, it charges that it is unreasonable for gsa to accept only sureties with net worths in excess of their total outstanding surety obligations. The protester concedes that federal procurement regulations (FPR) Sec. 1-10.203(a) compels the contracting officer to consider the nature and amounts of a surety's outstanding surety obligations, but believes this consideration should entail a more thorough analysis than merely reducing net worth by the total amount of surety obligations. Clear thru believes that the standard used by gsa is unnecessarily strict because it fails to take into account several factors which mitigate the government's financial risk under a bid bond, such as the unlikelihood of default on a bid (based on past experience) and the contingent nature of surety obligations. It also argues that where the sureties are both obligated on another bond, the penal amount of that bond should at most be deducted from the net worth of only one of the sureties for the purpose of the contracting officer's analysis. Predicting that gsa's continued application of this acceptability standard will make it difficult for some bidders to secure adequate bonding, clear thru asks that we direct gsa to relax this standard and find that the sureties on its bid bond were acceptable.

The regulations require that a bid bond be executed by two individual sureties, each having a net worth not less than the penal amount of the bond. FPR Sec. 1-10.203(a). That section entitled "individual sureties" provides further that--

* * * the number and amounts of other bonds upon which a proposed surety is bound, and the status of the contracts in connection with which such bonds were furnished, must be considered (BY the contracting officer) in determining the acceptability of the individual surety.

Because the contracting officer is not required to consider a surety's other bonds in any specific manner, he has discretion to determine how much weight to accord these bonds. In view of this discretion, we will not object to the contracting officer's treatment of a surety's other bonding obligations...