Bid bond – Mingkem http://mingkem.com/ Thu, 03 Nov 2022 21:34:51 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://mingkem.com/wp-content/uploads/2021/10/icon-7-120x120.png Bid bond – Mingkem http://mingkem.com/ 32 32 What is a bid bond and why is it important? https://mingkem.com/what-is-a-bid-bond-and-why-is-it-important/ Mon, 17 Oct 2022 09:38:43 +0000 https://mingkem.com/what-is-a-bid-bond-and-why-is-it-important/ You’ve probably heard of bonds in finance. These are securities or investments in the form of a loan. It can be used to fund businesses or projects for governments. There are different types of bonds, such as bid bonds and performance bonds. So, you must have asked yourself a lot of questions like what is […]]]>

You’ve probably heard of bonds in finance. These are securities or investments in the form of a loan. It can be used to fund businesses or projects for governments. There are different types of bonds, such as bid bonds and performance bonds.

So, you must have asked yourself a lot of questions like what is a bid bond? Why is this important? In short, bid bonds are a bid guarantee that the owner receives from the contractor as part of the process. You may have witnessed the use of bid bonds in the construction industry or jobs that follow a similar bidding pattern.

It’s time to study about them in detail and the relevance they would add to your life if you belong to the same industry. This article incorporates a deeper understanding of bonds and their relevant costs.

About Bid Bonds

Answer what is a bid bond this is often used in construction contracts or other projects that follow a similar selection process. The primary function of a tender is to assure the project owner that the tenderer must complete the task given to him if he is selected.

The bidding concept assures the owner that the bidder has the financial resources to purchase the work at the price stated in the bid. This guarantee is a type of bond that protects the owner during the bidding process.

A bid bond assures the client that the work entrusted will be completed if a bidder is selected. Without this bond, the owner cannot guarantee that the successful bidder for the project will be able to complete the task on time. He will also not be liable for compensatory costs.

Further, suppose the winning bidder fails to post a surety or goes bankrupt; it is the duty of the contractor or company to ensure that the owner receives a new bidder to complete the task. He could also obtain compensatory costs in the same case. It is usually a win-win case for the project owner to opt for the bid bond.

Importance of a Bid Bond

When developers decide to bid for a large or small development project, they often screen the bidders. The reason for the rejection is that the proponent wants to ensure that the bidder can complete the work according to the criteria mentioned in the contract.

Also, bonded bidders are always a better option, as the third party or surety company will not approve a bid security request. This rejection is possible if the tenderer is not credible.

The bonding process is lengthy and applicants are forced to undergo brutal background checks. Underwriters promptly request copies of applicants’ credit reports. This document includes your current credit rating and outstanding charges.

A good credit score provides the insurer with sufficient proof and the possibility of approving your application. While if you have a low credit score, this does not exclude your chances of bidding. There are times when bidders with low credit ratings have had the option of being bonded.

Additional Insights on Bid Bonds

A third party guarantor may provide sureties in the form of a written guarantee that can be presented to the project owner or building owner. A tender ensures that the contractor has sufficient financial resources to carry out the project. A performance bond generally replaces a bid bond when the offer is confirmed and the contractor is.

The cost of bonds depends on factors such as the location of the project, its critical ideas, the owner, the cost of the project, etc. For small tender projects, fees can range from $100 to $200.

Conclusion

Bid bonds are useful for the owner because contractors typically submit a detailed analysis of the project, including costs, in a bid format. The person who wins the tender is responsible for completing it. If the person does not do this, it is the responsibility of the contractor and the respective company. Either they find another person or they pay a compensatory fee for the period.

This bond is a win-win situation for the owner and is a great asset in the construction industry.

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Morning Auction: Bond Earthquake | Reuters https://mingkem.com/morning-auction-bond-earthquake-reuters-2/ Thu, 25 Aug 2022 07:00:00 +0000 https://mingkem.com/morning-auction-bond-earthquake-reuters-2/ A look at the day ahead in US and global markets from Mike Dolan As everyone watches Wyoming, global bond markets shook again this week even as equity markets stabilized. Regardless of the signals sent by Federal Reserve chief Jerome Powell or the long list of foreign central bankers at the Jackson Hole conference from […]]]>

A look at the day ahead in US and global markets from Mike Dolan

As everyone watches Wyoming, global bond markets shook again this week even as equity markets stabilized.

Regardless of the signals sent by Federal Reserve chief Jerome Powell or the long list of foreign central bankers at the Jackson Hole conference from Thursday, upward pressure on bond yields has intensified regardless. . Read more

Join now for FREE unlimited access to Reuters.com

Energy-related inflation fears are rising again, particularly in Europe, as natural gas and electricity prices continue to soar and crude oil prices rebound.

And while central banks will be forced to keep raising interest rates, the looming recessions this winter raise doubts about whether monetary authorities will be able or willing to bring price increases back to their target.

On top of that, estimates of the bill for governments to mitigate energy shocks to households and businesses are rising – with some reports this week it could cost the UK government up to 100 billion pounds ($118.4 billion ), most of which should be borrowed from the bond and bond markets.

Although governments have been successful in managing this crisis borrowing over the past 15 years, it was done when the cost of this borrowing was falling. With inflation back in the mix, these borrowing rates are rising sharply as central bank “quantitative easing” programs are reversed as they unwind bond holdings from the balance sheet and build on bond markets. rather than supporting them.

This is prompting another potentially deadly repricing of bonds and wondering whether pressures on public debt will allow central banks to put inflation back in the bottle.

Yields on 2- and 10-year US Treasuries hit their highest levels since June on Wednesday and maintained those moves today. Much of the gains were driven by higher 2-, 5- and 10-year inflation expectations, with some citing President Joe Biden’s student debt cancellation plan as worsening the price outlook. Read more

But the surge in bond yields was global and no doubt driven by a rise in UK gilts, where 2-year yields hit their highest level since the 2008 crash and the 2-10-year yield curve was more inverted. that at any time since then as well.

German 10-year yields also hit their highest level since June, with better-than-expected German GDP in the second quarter and August business surveys on Thursday. Read more . Minutes of the European Central Bank policy meeting are expected later.

Stocks continued to hold up despite the bond jolt and U.S. futures are up ahead of Thursday’s open, with China’s latest $44 billion fiscal stimulus also helping the mood in Asia .

The dollar has also retreated from recent highs, with many reports citing news that China’s foreign exchange regulator has warned banks against selling yuan. Read more

South Korea’s central bank raised its benchmark policy rate by a quarter of a percentage point to 2.50%, resuming normal increases of 25 basis points after making an unprecedented 50 basis point hike in July.

G7 returns over 2 years

Key developments that should further guide US markets later on Thursday:

* US Q2 GDP revision, core PCE; weekly jobless claims; Kansas City Fed Manufacturing Activity Index in August

* Annual Jackson Hole Central Bank Forum Begins

*July ECB Policy Meeting Minutes* Gains: Dollar Tree, Dollar General, Peloton, Affirm, Workday, Marvell Technology

* US Treasury Auctions 7-Year Notes; UK gilt auctions 2025

($1 = 0.8448 pounds)

Join now for FREE unlimited access to Reuters.com

By Mike Dolan, editing by Emelia Sithole-Matarise; mike.dolan@thomsonreuters.com. Twitter: @ReutersMikeD

Our standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and non-partisanship by principles of trust.

]]>
Morning Auction: Bond Earthquake | Reuters https://mingkem.com/morning-auction-bond-earthquake-reuters/ Thu, 25 Aug 2022 07:00:00 +0000 https://mingkem.com/morning-auction-bond-earthquake-reuters/ A look at the day ahead in US and global markets from Mike Dolan As everyone watches Wyoming, global bond markets shook again this week even as equity markets stabilized. Regardless of the signals sent by Federal Reserve chief Jerome Powell or the long list of foreign central bankers at the Jackson Hole conference from […]]]>

A look at the day ahead in US and global markets from Mike Dolan

As everyone watches Wyoming, global bond markets shook again this week even as equity markets stabilized.

Regardless of the signals sent by Federal Reserve chief Jerome Powell or the long list of foreign central bankers at the Jackson Hole conference from Thursday, upward pressure on bond yields has intensified regardless. . Read more

Join now for FREE unlimited access to Reuters.com

Energy-related inflation fears are rising again, particularly in Europe, as natural gas and electricity prices continue to soar and crude oil prices rebound.

And while central banks will be forced to keep raising interest rates, the looming recessions this winter raise doubts about whether monetary authorities will be able or willing to bring price increases back to their target.

On top of that, estimates of the bill for governments to mitigate energy shocks to households and businesses are rising – with some reports this week it could cost the UK government up to 100 billion pounds ($118.4 billion ), most of which should be borrowed from the bond and bond markets.

Although governments have been successful in managing this crisis borrowing over the past 15 years, it was done when the cost of this borrowing was falling. With inflation back in the mix, these borrowing rates are rising sharply as central bank “quantitative easing” programs are reversed as they unwind bond holdings from the balance sheet and build on bond markets. rather than supporting them.

This is prompting another potentially deadly repricing of bonds and wondering whether pressures on public debt will allow central banks to put inflation back in the bottle.

Yields on 2- and 10-year US Treasuries hit their highest levels since June on Wednesday and maintained those moves today. Much of the gains were driven by higher 2-, 5- and 10-year inflation expectations, with some citing President Joe Biden’s student debt cancellation plan as worsening the price outlook. Read more

But the surge in bond yields was global and no doubt driven by a rise in UK gilts, where 2-year yields hit their highest level since the 2008 crash and the 2-10-year yield curve was more inverted. that at any time since then as well.

German 10-year yields also hit their highest level since June, with better-than-expected German GDP in the second quarter and August business surveys on Thursday. Read more . Minutes of the European Central Bank policy meeting are expected later.

Stocks continued to hold up despite the bond jolt and U.S. futures are up ahead of Thursday’s open, with China’s latest $44 billion fiscal stimulus also helping the mood in Asia .

The dollar has also retreated from recent highs, with many reports citing news that China’s foreign exchange regulator has warned banks against selling yuan. Read more

South Korea’s central bank raised its benchmark policy rate by a quarter of a percentage point to 2.50%, resuming normal increases of 25 basis points after making an unprecedented 50 basis point hike in July.

G7 returns over 2 years

Key developments that should further guide US markets later on Thursday:

* US Q2 GDP revision, core PCE; weekly jobless claims; Kansas City Fed Manufacturing Activity Index in August

* Annual Jackson Hole Central Bank Forum Begins

*July ECB Policy Meeting Minutes* Gains: Dollar Tree, Dollar General, Peloton, Affirm, Workday, Marvell Technology

* US Treasury Auctions 7-Year Notes; UK gilt auctions 2025

($1 = 0.8448 pounds)

Join now for FREE unlimited access to Reuters.com

By Mike Dolan, editing by Emelia Sithole-Matarise; mike.dolan@thomsonreuters.com. Twitter: @ReutersMikeD

Our standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and freedom from bias by principles of trust.

]]>
Read the Fine Print: Does Your Bid Bond Cover Replacement Execution Costs? | Seyfarth Shaw LLP https://mingkem.com/read-the-fine-print-does-your-bid-bond-cover-replacement-execution-costs-seyfarth-shaw-llp/ Fri, 29 Jul 2022 18:09:43 +0000 https://mingkem.com/read-the-fine-print-does-your-bid-bond-cover-replacement-execution-costs-seyfarth-shaw-llp/ The Federal Acquisition Regulation (“FAR”) contains many standard and optional forms for use in acquisitions. A Standard Form (SF) is considered mandatory. For example, any bilateral or unilateral modification of a contract must use SF 30 (“Amendment of Solicitation/Modification of Contract”), as prescribed in FAR 43.301. Where a solicitation includes an FAR provision or clause […]]]>

The Federal Acquisition Regulation (“FAR”) contains many standard and optional forms for use in acquisitions. A Standard Form (SF) is considered mandatory. For example, any bilateral or unilateral modification of a contract must use SF 30 (“Amendment of Solicitation/Modification of Contract”), as prescribed in FAR 43.301. Where a solicitation includes an FAR provision or clause that mandates the use of a standard form, contractors must ensure that they use that standard form, or run the risk of their bid being deemed non-compliant. In other words, the use of a non-standard form may deviate from or alter the prescribed rights granted to the government through the standard form, resulting in the elimination of the competition’s offer.

This is what happened in Leeward construction company, B-420504, 3 March 2022, 2022 WL 621391, where the Government Accountability Office (“GAO”) rejected a building contractor’s protest against the rejection of its bid because the protester had submitted a bid bond on a non-standard form—where a standard form was otherwise prescribed—this unduly limited the government’s recovery of the representation costs of surrogates. The protester alleged that his bid bond met the requirements contained in the IFB (“IBF”) because the bond protected the government’s right to restocking costs in the event of a default. However, after reviewing the protester’s bid bond, the GAO agreed with the agency that the bid bond limited government recovery to resupply costs only, unlike the IFB and FAR. When submitting a bid, contractors using a bid bond document other than the standard government form should read the fine print to ensure it is IFB and FAR compliant.

Non-standard bid bond form did not meet IFB bid bond requirement

The US Army Corps of Engineers (the “Corps” or “Army”) issued an IFB to remove the stone facing from the General Edgar Jadwin Dam in Wayne County, Pennsylvania. The IFB has incorporated FAR provision 52.228-1, Bid Security, which states, in part:[1]

(a) Failure to provide a bid security in the appropriate form and amount, by the date fixed for opening of bids, may result in the rejection of the bid.

(e) In the event the Contract is terminated for default, the Bidder is responsible for any cost of acquiring the Work which exceeds the amount of its Bid, and Bid Security is available to make up the difference.

Notably, FAR 28.106-1 prescribes the use of SF 24 when a bid bond is required. However, while the IFB contained FAR 52.228-1 in its entirety, it did not direct bidders to use any particular form of bid bond. The protester, Leeward Construction Corporation (“Leeward”), did not use the SF 24, but instead used Document A310 – 2010, Bid Bond from the American Institute of Architects (AIA), which provides that the bond, in the event of a fault:

[P]grants the Owner the difference, not exceeding the amount of this bond, between the amount specified in said offer and the greater amount for which the Owner may in good faith contract with another party to perform the work covered by said offer, then this obligation is null and void, otherwise it will remain in full force and effect.

Before submitting his bid, Leeward called the Corps to clarify the form he could use for the bid bond. The contract specialist said that the IFB only requires a bid bond in the required amount and does not require the use of a special form. Leeward timely submitted its bid to the Corps using Form AIA for its bid bond instead of the SF 24. All other bidders used the SF 24.

The Corps deemed Leeward’s bid non-compliant for failing to meet IFB’s bid bond requirement. In rejecting Leeward’s offer, the contracting officer relied on two previous GAO decisions in which GAO concluded that the same AIA form used by Leeward contained different rights and remedies than those provided by FAR provision 52.228-1.[2] Leeward timely protested to the GAO.

GAO argues Leeward’s AIA form did not sufficiently protect government rights

Leeward argued that the bid bond sufficiently protects the government because it ensures that the government can recoup restocking costs. However, the GAO deemed this argument irrelevant because FAR 52.228-1 and SF 24 allow the agency to recover more than the restocking fee (for example, administrative costs or internal performance costs). GAO has found that the RBF allows the government to recover its costs of replacement performance in general while the protester’s bid bond limits the agency’s repossession to restocking costs only. Accordingly, the GAO dismissed this ground of protest for failing to state a sufficient legal or factual basis to protest.

Leeward also argued that the IFB was ambiguous, which the GAO also rejected. The GAO has indicated that its bid protest regulations require the filing of protests based on IFB irregularities. before closing of the receipt of tenders. The GAO further noted that the protester has a positive obligation to seek clarification. prior to deadline for submission of tenders. The GAO dismissed this reason for protest as inappropriate.

Leeward also argued that she reasonably relied on the oral advice of the contracts specialist who indicated that the IFB did not require the use of the SF-24 or any other particular form. However, the GAO explained that the acceptability of the bid bond depends on the rights and obligations of the parties that the bid bond protects. Notwithstanding what the Contracts Specialist has advised, GAO has found that the Government cannot be bound by oral advice given to bidders by its representatives, and bidders rely on such advice at their own risk. The GAO found this reason legally and factually insufficient.

The COFC renders a judgment in favor of the government

Following her loss to the GAO, Leeward filed a subsequent protest with the Federal Claims Court (“COFC”), where she fared no better. Leeward argued that the Army erred in law in determining that a limitation of liability in its bid bond deviated significantly from IFB requirements and that, even if the bid did not comply , the military should have waived non-compliance. The government argued that ambiguities in the wording of Leeward’s bid bond were a defense to execution and that the Army had reasonably relied on previous GAO rulings to conclude that the bid bond was defective. In accepting the requests of the government and the intervener in judgment on the administrative file, the court drew a certain number of conclusions.

First, the court found that Leeward’s bid bond did not comply with the IFB to the extent that Form AIA A310, as used by Leeward, did not comply with the requirements of FAR 52. 228 -1(e). Leeward initially argued that a particular provision of his bid bond – known as the “savings clause” – actually incorporated FAR 52.228-1(e) by reference, and therefore the government was still protected. by this clause. However, the court determined that the wording of the AIA A310 safeguard clause was too broad and indefinite to constitute a valid incorporation by reference of any legal or regulatory requirement, let alone the requirements provided by the FAR. The court also found the wording of the AIA A310 savings clause too ambiguous to function as a “legal obligation”, which would otherwise incorporate FAR 52.228-1(e) (as Leeward argued in its reply brief).

Second, the court found that the failure of Leeward’s bid bond was material. Leeward argued that limiting the surety’s liability would have no material effect on the recovery of the Army in the event of default. In rejecting this argument, the court held that the bid bond requirement was an important aspect of the IFB because it was binding on bidders and had a more than negligible impact on the quality of bids. Thus, Leeward’s error was not a matter of form, but rather a matter of substance. The court acknowledged that the limitation of liability in Leeward’s bid bond created uncertainty about how much the government would be able to recover in future resupply costs.

Third, the court determined that the wording of Leeward’s bid bond was a defense to execution, that’s to say, a demonstrable risk of future litigation. Leeward challenged the Army’s reliance on two previous GAO rulings dealing with the same bid bond language. The court raised no such issue with the Army’s reliance on the same when faced with the ambiguity presented in Leeward’s bid bond, finding that while not binding on the army, the GAO decisions relied on were valid and legally correct to find exactly the same surety. improper. Therefore, the Army’s reliance on GAO decisions on this issue was rational.

Take away food

Government forms exist for one reason: to provide guidance to contractors on what information, rights and obligations the government expects in a particular scenario. Bidders choosing to use anything other than a standard government form to submit the same information do so at their own risk. As with bid bonds, GAO and COFC will not support a protest challenging the agency’s rejection of a bid that does not provide an adequate bond where a bidder has elected to post its bid bond on a non-standard government form. If a Bidder intends to use a different form, the Bidder should read the fine print to confirm that the Surety provides substantially the same rights and remedies to the parties as the IFB and FAR require. Even where, as here, the government informed the protester that there was no special form that bidders were required to use, bidders should still default to standard government forms or else they would run the risk to be disqualified.


[1] FAR layout is available at https://www.acquisition.gov/far/52.228-1.

[2] These decisions are Pacific Dredge and Constr., LLCB-418900, September 18, 2020, DPC 2020 ¶ 299, and G2G, LLCB-416502, September 27, 2018, DPC 2018 ¶ 328.

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Read the fine print: does your bid bond cover replacement performance costs? – Public procurement, procurement and PPP https://mingkem.com/read-the-fine-print-does-your-bid-bond-cover-replacement-performance-costs-public-procurement-procurement-and-ppp/ Fri, 29 Jul 2022 17:59:00 +0000 https://mingkem.com/read-the-fine-print-does-your-bid-bond-cover-replacement-performance-costs-public-procurement-procurement-and-ppp/ The Federal Acquisition Regulation (“FAR”) contains many standard and optional forms for use in acquisitions. A Standard Form (SF) is considered mandatory. For example, any bilateral or unilateral modification of a contract must use SF 30 (“Amendment of Solicitation/Modification of Contract”), as prescribed in FAR 43.301. Where a solicitation includes an FAR provision or clause […]]]>

The Federal Acquisition Regulation (“FAR”) contains many standard and optional forms for use in acquisitions. A Standard Form (SF) is considered mandatory. For example, any bilateral or unilateral modification of a contract must use SF 30 (“Amendment of Solicitation/Modification of Contract”), as prescribed in FAR 43.301. Where a solicitation includes an FAR provision or clause that mandates the use of a standard form, contractors must ensure that they use that standard form, or run the risk of their bid being deemed non-compliant. In other words, the use of a non-standard form may deviate from or alter the prescribed rights granted to the government through the standard form, resulting in the elimination of the competition’s offer.

This is what happened in Leeward construction company, B-420504, 3 March 2022, 2022 WL 621391, where the Government Accountability Office (“GAO”) rejected a building contractor’s protest against the rejection of its bid because the protester had submitted a bid bond on a non-standard form—where a standard form was otherwise prescribed—this unduly limited the government’s recovery of the representation costs of surrogates. The protester alleged that his bid bond met the requirements contained in the IFB (“IBF”) because the bond protected the government’s right to restocking costs in the event of a default. However, after reviewing the protester’s bid bond, the GAO agreed with the agency that the bid bond limited government recovery to resupply costs only, unlike the IFB and FAR. When submitting a bid, contractors using a bid bond document other than the standard government form should read the fine print to ensure it is IFB and FAR compliant.

Non-standard bid bond form did not meet IFB bid bond requirement

The US Army Corps of Engineers (the “Corps” or “Army”) issued an IFB to remove the stone facing from the General Edgar Jadwin Dam in Wayne County, Pennsylvania. The IFB has incorporated FAR provision 52.228-1, Bid Security, which states, in part:1

(a) Failure to provide a bid security in the appropriate form and amount, by the date fixed for opening of bids, may result in the rejection of the bid.

(e) In the event of termination of the Contract for default, the Bidder is responsible for any cost of acquiring the Work which exceeds its Bid Amount, and Bid Security is available to make up the difference.

Notably, FAR 28.106-1 prescribes the use of SF 24 when a bid bond is required. However, while the IFB contained FAR 52.228-1 in full, it did not direct bidders to use any particular form of bid bond. The protester, Leeward Construction Corporation (“Leeward”), did not use the SF 24, and instead used American Institute of Architects (AIA) Document A310 – 2010, Bid Bond, which provides that the bond, in the event of a fault:

[P]grants the Owner the difference, not exceeding the amount of this bond, between the amount specified in said offer and the greater amount for which the Owner may in good faith contract with another party to perform the work covered by said offer, then this obligation is null and void, otherwise it will remain in full force and effect.

Before submitting his bid, Leeward called the Corps to clarify the form he could use for the bid bond. The contract specialist said that the IFB only requires a bid bond in the required amount and does not require the use of a special form. Leeward timely submitted its bid to the Corps using Form AIA for its bid bond instead of the SF 24. All other bidders used the SF 24.

The Corps deemed Leeward’s bid non-compliant for failing to meet IFB’s bid bond requirement. In rejecting Leeward’s offer, the contracting officer relied on two previous GAO decisions in which GAO concluded that the same AIA form used by Leeward contained different rights and remedies than those provided by FAR provision 52.228-1.2 Leeward timely protested to the GAO.

GAO argues Leeward’s AIA form did not sufficiently protect government rights

Leeward argued that the bid bond sufficiently protects the government because it ensures that the government can recoup restocking costs. However, the GAO deemed this argument irrelevant because FAR 52.228-1 and SF 24 allow the agency to recover more than the restocking fee (for example, administrative costs or internal performance costs). GAO has found that the RBF allows the government to recover its costs of
replacement performance in general while the protester’s bid bond limits the agency’s repossession to restocking costs only. Accordingly, the GAO dismissed this ground of protest for failing to state a sufficient legal or factual basis to protest.

Leeward also argued that the IFB was ambiguous, which the GAO also rejected. The GAO has indicated that its bid protest regulations require the filing of protests based on IFB irregularities. before closing of the receipt of tenders. The GAO further noted that the protester has a positive obligation to seek clarification. prior todeadline for submission of tenders. The GAO dismissed this reason for protest as inappropriate.

Leeward also argued that she reasonably relied on the oral advice of the contracts specialist who indicated that the IFB did not require the use of the SF-24 or any other particular form. However, the GAO explained that the acceptability of the bid bond depends on the rights and obligations of the parties that the bid bond protects. Notwithstanding what the Contracts Specialist has advised, GAO has found that the Government cannot be bound by oral advice given to bidders by its representatives, and bidders rely on such advice at their own risk. The GAO found this reason legally and factually insufficient.

The COFC renders a judgment in favor of the government

Following her loss to the GAO, Leeward filed a subsequent protest with the Federal Claims Court (“COFC”), where she fared no better. Leeward argued that the Army erred in law in determining that a limitation of liability in its bid bond deviated significantly from IFB requirements and that, even if the bid did not comply , the military should have waived non-compliance. The government argued that ambiguities in the wording of Leeward’s bid bond were a defense to execution and that the Army had reasonably relied on previous GAO rulings to conclude that the bid bond was defective. In accepting the requests of the government and the intervener in judgment on the administrative file, the court drew a certain number of conclusions.

First, the court found that Leeward’s bid bond did not comply with the IFB to the extent that Form AIA A310, as used by Leeward, did not comply with the requirements of FAR 52. 228 -1(e). Leeward originally argued that a particular provision of his bid bond – known as the “savings clause” – actually incorporated FAR 52.228-1(e) by reference, and therefore the government was still protected. by this clause. However, the court determined that the wording of the AIA A310 safeguard clause was too broad and indefinite to constitute a valid incorporation by reference of any legal or regulatory requirement, let alone the requirements provided by the FAR. The court also found the wording of the AIA A310 savings clause too ambiguous to function as a “legal obligation”, which would otherwise incorporate FAR 52.228-1(e) (as Leeward argued in its reply brief) .

Second, the court found that the failure of Leeward’s bid bond was material. Leeward argued that limiting the surety’s liability would have no material effect on the recovery of the Army in the event of default. In rejecting this argument, the court held that the bid bond requirement was an important aspect of the IFB because it was binding on bidders and had a more than negligible impact on the quality of bids. Thus, Leeward’s error was not a matter of form, but rather a matter of substance. The court acknowledged that the limitation of liability in Leeward’s bid bond created uncertainty about how much the government would be able to recover in future resupply costs.

Third, the court determined that the wording of Leeward’s bid bond was a defense to execution, that’s to say, a demonstrable risk of future litigation. Leeward challenged the Army’s reliance on two previous GAO rulings dealing with the same bid bond language. The court raised no such issue with the Army’s reliance on the same when faced with the ambiguity presented in Leeward’s bid bond, finding that while not binding on the army, the GAO decisions relied on were valid and legally correct to find exactly the same surety. improper. Therefore, the Army’s reliance on GAO decisions on this issue was rational.

Take away food

Government forms exist for one reason: to provide guidance to contractors on what information, rights and obligations the government expects in a particular scenario. Bidders choosing to use anything other than a standard government form to submit the same information do so at their own risk. As with bid bonds, GAO and COFC will not support a protest challenging the agency’s rejection of a bid that does not provide an adequate bond where a bidder has elected to post its bid bond on a non-standard government form. If a Bidder intends to use a different form, the Bidder should read the fine print to confirm that the Surety provides substantially the same rights and remedies to the parties as the IFB and FAR require. Even where, as here, the government informed the protester that there was no special form that bidders were required to use, bidders should still default to standard government forms or else they would run the risk to be disqualified.

Footnotes

1. The FAR provision is available at https://www.acquisition.gov/far/52.228-1.

2. These decisions are Pacific Dredge and Constr., LLCB-418900, September 18, 2020, DPC 2020 ¶ 299, and
G2G, LLCB-416502, September 27, 2018, DPC 2018 ¶ 328.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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Renewable Energy Developers Subject to Cancellation of Bid Bond – Manila Bulletin https://mingkem.com/renewable-energy-developers-subject-to-cancellation-of-bid-bond-manila-bulletin/ Mon, 27 Jun 2022 08:00:00 +0000 https://mingkem.com/renewable-energy-developers-subject-to-cancellation-of-bid-bond-manila-bulletin/ Renewable energy (RE) developers, who have been awarded 20-year power supply contracts (PSAs) under the Green Power Auction Program (GEAP), risk the cancellation of bid bonds if they fail to provide the committed capacity. Cancellation of bid bonds by Principal Undersecretary for Energy Felix William B. Fuentebella awaits renewable energy developers who cannot meet the […]]]>

Renewable energy (RE) developers, who have been awarded 20-year power supply contracts (PSAs) under the Green Power Auction Program (GEAP), risk the cancellation of bid bonds if they fail to provide the committed capacity.

Cancellation of bid bonds by Principal Undersecretary for Energy Felix William B. Fuentebella awaits renewable energy developers who cannot meet the target commercial operation date (COD) as well as delivery subsequent capacity required of their projects.

The Bid Bond, which is 20% of the RE project cost, is one of the key requirements to be submitted by a qualified bidder, as stipulated in the Terms of Reference (TOR) of the RE auction administered by the Department of Energy. .

“If (the developer of the RE project) cannot deliver, we will not pay. We will call on the company’s bid bond,” he said.

PSAs awarded to RE developers, he explained, are anchored on a “pay-as-you-go basis,” which means payment for capacity must be based on generated capacity to deliver and price. payment calculated on the winning price offer of a specified developer.

The energy chief also explained that in allocating 1,966.93 megawatts of renewable energy capacity on June 24, the Green Energy Auction Committee allowed an oversubscription for solar technology on the basis of the terms of reference of the renewable energy tendering process.

Primarily, the auctioned solar capacity for the Luzon grid was set at 900 MW, but the awarded contracts covered a total capacity of 1,070.38 MW; and the same goes for the Visayas grid, whose auctioned solar capacity was 260 MW, but the allocated capacity reached 300 MW while for the Mindanao grid, the auctioned capacity was set at 100 MW but the assigned capacity fluctuated at 120 MW.

Under clause 7.3.2.2 of ER’s auction terms of reference, it was stated that “in the event that the quantity offered by a bidder becomes the marginal bid, but the quantity bid exceeds the requirement capacity of the auction after ranking and aggregation of bids, the total quantity offered by the bidder will be included as the winning bid, provided that the excess quantity offered by the bidder does not exceed 20% of the capacity requirement of the RE installation auction per network.

If the marginal supply exceeds the prescribed 20% allocation, Fuentebella said the winning RE developer will be asked to “reduce capacity” within the allowed oversubscribed capacity.

The other option for the bidder, he noted, is for them to “opt out of the auction”, without forfeiture of their bid bond.

The tender conditions further specified that in the event of the withdrawal of the tenderer, “the next tenderer will be considered to be subject to the same conditions”.

The initial auction of 2,000MW of renewable energy capacity under the outgoing Duterte administration is just the first round of a series of tenders scheduled for Renewable Portfolio Standards (RPS) compliance. mandated participants, primarily distribution utilities (DUs) which are required to secure a certain percentage of their supply from renewable energy generated sources.

As the Department of Energy pointed out, the RE capacities that would be put up for tender in the short term would be in the range of 4,000 to 5,000 megawatts.

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Renewable Energy Developers Subject to Cancellation of Bid Bond – Manila Bulletin https://mingkem.com/renewable-energy-developers-subject-to-cancellation-of-bid-bond-manila-bulletin-2/ Mon, 27 Jun 2022 07:00:00 +0000 https://mingkem.com/renewable-energy-developers-subject-to-cancellation-of-bid-bond-manila-bulletin-2/ Renewable energy (RE) developers, who have been awarded 20-year power supply contracts (PSAs) under the Green Power Auction Program (GEAP), risk the cancellation of bid bonds if they fail to provide the committed capacity. Cancellation of bid bonds by Principal Undersecretary for Energy Felix William B. Fuentebella awaits renewable energy developers who cannot meet the […]]]>

Renewable energy (RE) developers, who have been awarded 20-year power supply contracts (PSAs) under the Green Power Auction Program (GEAP), risk the cancellation of bid bonds if they fail to provide the committed capacity.

Cancellation of bid bonds by Principal Undersecretary for Energy Felix William B. Fuentebella awaits renewable energy developers who cannot meet the target commercial operation date (COD) as well as delivery subsequent capacity required of their projects.

The Bid Bond, which is 20% of the RE project cost, is one of the key requirements to be submitted by a qualified bidder, as stipulated in the Terms of Reference (TOR) of the RE auction administered by the Department of Energy. .

“If (the developer of the RE project) cannot deliver, we will not pay. We will call on the company’s bid bond,” he said.

PSAs awarded to RE developers, he explained, are anchored on a “pay-as-you-go basis,” which means payment for capacity must be based on generated capacity to deliver and price. payment calculated on the winning price offer of a specified developer.

The energy chief also explained that when allocating 1,966.93 megawatts of renewable energy capacity on June 24, the green energy auction committee allowed an oversubscription for solar technology on the basis of the terms of reference of the renewable energy tendering process.

Primarily, the auctioned solar capacity for the Luzon grid was set at 900 MW, but the awarded contracts covered a total capacity of 1,070.38 MW; and the same goes for the Visayas grid, whose auctioned solar capacity was 260 MW, but the allocated capacity reached 300 MW while for the Mindanao grid, the auctioned capacity was set at 100 MW but allocated capacity fluctuated at 120 MW.

Under clause 7.3.2.2 of the ER Auction Terms of Reference, it was stated that “in the event that the quantity offered by a bidder becomes the marginal bid, but the quantity offered exceeds the capacity requirement of the auction after ranking and aggregation of bids, the total quantity offered by the bidder will be included as the winning bid, provided that the excess quantity offered by the bidder does not exceed 20% of the capacity requirement of the auction. auction of the RE installation by network. »

If the marginal supply exceeds the prescribed 20% allocation, Fuentebella said the winning RE developer would be asked to “reduce capacity” within the allowed oversubscribed capacity.

The other option for the bidder, he noted, is for them to “opt out of the auction”, without forfeiture of their bid bond.

The tender conditions further specified that in the event of the withdrawal of the tenderer, “the next tenderer will be considered to be subject to the same conditions”.

The initial auction of 2,000MW of renewable energy capacity under the outgoing Duterte administration is just the first round of a series of scheduled tenders for Renewable Portfolio Standards (RPS) compliance. mandated participants, primarily distribution utilities (DUs) which are required to secure a certain percentage of their supply from renewable energy generated sources.

As the Department of Energy has pointed out, the RE capacities that would be put up for tender in the short term would be in the range of 4,000 to 5,000 megawatts.

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Stories from the National Appeals Chamber: Bid Bond Validity vs. Bid Validity Period https://mingkem.com/stories-from-the-national-appeals-chamber-bid-bond-validity-vs-bid-validity-period/ Thu, 19 May 2022 07:00:00 +0000 https://mingkem.com/stories-from-the-national-appeals-chamber-bid-bond-validity-vs-bid-validity-period/ As host of the procedure, the contracting authority must specify in the contractual documentation the formal and technical requirements of a bid bond. In some procurement procedures, the contracting authority requires contractors to submit a bid bond whose validity extends beyond the validity period of bids. In a recent decision, the National Appeals Chamber ruled […]]]>

As host of the procedure, the contracting authority must specify in the contractual documentation the formal and technical requirements of a bid bond. In some procurement procedures, the contracting authority requires contractors to submit a bid bond whose validity extends beyond the validity period of bids. In a recent decision, the National Appeals Chamber ruled on the question of whether such provisions of the warrant are permissible or invalid under the law (Case No. KIO 3482/21).

An entrepreneur goes before the National Appeals Chamber

In the terms of reference, the contracting authority required the contractors to allow it to effectively satisfy the guarantee or surety after the expiry of the period of validity of the tenders. The contracting authority has clarified that contractors should give it the opportunity to request payment of the bid bond during the period of:

  • Up to two working days after the end of the period of validity of tenders, if electronic submission of payment requests has been authorized, or
  • Up to seven working days after the end of the period of validity of the offer, if a written request for payment was required.

However, during the examination of the tenders, it turned out that the period of validity of one of the bid bonds of the contractors was to expire on the same day as the expiry of the period of validity of the tenders. Consequently, the contracting authority decided to reject the offer, stating that the bid bond presented did not meet the requirements of the ToR. In the opinion of the contracting authority, the wording of the guarantee suggested that if the conditions for payment of the amount of the bid bond had appeared towards the end of the validity of the guarantee, it would not in practice be possible to execute the guarantee due to the formal procedures which, in accordance with the requirements of the bank, must accompany the request for payment.

But the entrepreneur excluded from the procedure refused to give up and appealed to the National Appeals Chamber for erroneous rejection of his offer pursuant to art. 226(1)(14) Polish Public Procurement Law. The contractor considered that the bid bond should remain valid only until the end of the validity period of the tenders, at which time the contracting authority should complete the procedure for the selection of the contractor.

The contracting authority has discretionary power, but it is limited

First, the National Appeals Chamber pointed out that the contracting authority is the host of the procedure and therefore the law on public procurement grants it a certain freedom in elaborating the terms of the contractual documentation. This gives the contracting authority the right to require a bid bond, and if it chooses to exercise this right, it is required to specify the requirements for the amount and timing of payment of the deposit. However, this does not mean that the contracting authority can formulate the ToR in an unlimited manner, since the margin of appreciation conferred on it is limited by the generally applicable legal provisions, in particular the law on public procurement. This means that all formulations of the terms of reference not contested by the contractors will not be absolutely binding.

In principle, the chamber authorized the contracting authority to define the formal and technical requirements of the bid bond. The board admitted the difficulty of asserting a guarantee or bond if the contracting authority requests payment of the bid bond on the last day of the period of validity of the bids, in particular if the guarantor requires that the request for payment be presented in a manner that it can seriously be doubted that the contracting authority is able to satisfy its claims.

To solve this problem, the contracting authority must structure the documentation in such a way that it can successfully submit a request for payment on the last day. However, the contracting authority may not formulate the ToR in violation of generally applicable law. In this case, the board concluded that the contested provisions of the ToR were not only invalid under Art. 58 of the Civil Code, but also violated the fundamental principles of public order governed by art. 16 (1) and (3) of the Public Procurement Act.

De factothe contracting authority circumvented the law

In accordance with art. 97(5) of the Public Procurement Act, a bid bond is presented before the deadline for submission of bids and must be maintained without interruption until the expiry of the period of validity of bids. However, the contracting authority has exceeded this deadline by requiring the submission of a bid bond valid for two to seven working days beyond the period of validity of the offers. Thus, in the opinion of the board, the wording of the ToR was inadmissible, as it constituted a legal act aimed at circumventing the law (in fraud legis), while appearing to respect the law. The wording of the ToR did not contain elements directly contrary to the law, but the effect it produced violated the obligation to maintain the bid bond exclusively until the expiry of the period of validity of the offers. In the opinion of the board, this action fell within the scope of Art. 58, meaning it should be considered invalid and not deserving of legal protection.

The appeal panel also noted that the wording of the procedural documentation unfairly differentiated the situation of contractors depending on the type of bond they had posted, namely those who had posted cash bond and those who had deposited a bond in the form of a bank guarantee. In the board’s view, this violated the principle of equal treatment of contractors (Public Procurement Act, Art. 16(1)) and was unjustified, as the bank guarantee should provide a similar level of protection to money available in the contracting authority’s account. bank account, and not allow a longer time to submit a request for payment than a bid bond posted in cash.

Therefore, the contracting authority’s action was disproportionate to the problem it sought to resolve with the contested provisions of the ToR. The additional two working days for submitting a request for payment in electronic form or the seven working days for submitting a request for payment in writing after the expiry of the validity period of the offer was disproportionate to give the contracting authority the possibility of being actually satisfied with the bid bond, i.e. it went beyond what was necessary for the contracting authority to achieve its purpose. According to the Chamber, it would suffice to specify in the ToR a method of issuing a request for payment to the guarantor or surety for there to be a real possibility of presenting an effective request for payment within the period of validity of the offer (especially on the last day), for example by including an obligation to accept a request for payment sent by post or entered into the computer system during the period of validity of the offer.

Eventually, the National Appeals Chamber upheld the appeal, ordering the contracting authority to reverse the rejection of the bid and reconsider the bids.

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Hurry and Wait: Bid Bond Requests Arising from a Delayed Award https://mingkem.com/hurry-and-wait-bid-bond-requests-arising-from-a-delayed-award/ Mon, 11 Apr 2022 09:11:12 +0000 https://mingkem.com/hurry-and-wait-bid-bond-requests-arising-from-a-delayed-award/ Claims on contractors’ bid bonds are a risk to be prepared for now more than ever. Bid bonds protect owners against the cost of re-bidding a project if the lowest bidder does not accept the contract. But what if the owner’s delays in selecting a contractor are the catalyst for the claim? Why are project […]]]>

Claims on contractors’ bid bonds are a risk to be prepared for now more than ever. Bid bonds protect owners against the cost of re-bidding a project if the lowest bidder does not accept the contract. But what if the owner’s delays in selecting a contractor are the catalyst for the claim?

Why are project promoters delayed?

As project owners grapple with staffing shortages, the impacts of working from home, and other challenges, significant time can elapse between the submission of a bid and the owner’s awarding of the contract. The problem is that when an award is delayed, the contractor’s situation may change. Their backlog may increase, material costs and lead times may change significantly, and labor may be shifted to other tasks. In these cases, the contractor may determine that it is no longer possible or economical to perform the contract as originally offered. A contractor refusing the contract will likely cause the project owner to assert a bid bond claim.

How much could it cost?

Understanding the mechanics of the bid bond and the claims process from the outset helps the entrepreneur calculate their exposure and make a business decision on how best to proceed.

  • The amount of the bid bond is a specific percentage (usually five to ten percent) of the bid amount and represents the maximum amount the owner can recover if the contractor refuses the contract.
  • Generally, assuming the claim is valid, the amount owed to the owner is the lesser of the amount of the bond or the difference between the contractor’s lowest bid and the second lowest bid.

What are the lowest bidder options?

After evaluating the bid gap, the amount of the bond and its expected costs to perform the work, the contractor may decide to pay the owner the amount it would otherwise be entitled to recover under the bond, to absorb the increase in costs and pursue the contract, or try to negotiate an alternative solution with the owner.

How does bail help?

As part of the surety’s independent investigation of a bid bond application, the surety will work with the contractor to review the bid solicitation, bid instructions, applicable law, specific bond terms, the bid gap and the bid itself. In certain circumstances, the Owner’s failure to award the Contract in a timely manner will release the Contractor from its obligation to accept the Contract or the Bond from its obligation under the Bond. The bond could also help the contractor to negotiate a practical solution with the owner. Regardless of the circumstances, open communication between the contractor and their surety can help the contractor make the right business decision and limit their exposure.

Contract language can help

To reduce the likelihood of a bid bond being requested, the contractor should consider negotiating the wording of the bid bond with the owner at the outset to compel the prompt issuance of an award or incorporating wording in their proposal. to protect against price increases in the event of a delay. in the price. The Entrepreneur Bond is an excellent resource to help the entrepreneur develop appropriate language to achieve entrepreneur goals and mitigate the risk of exposure to the entrepreneur.

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Hurry and Wait: Bid Bond Requests Arising from a Delayed Award https://mingkem.com/hurry-and-wait-bid-bond-requests-arising-from-a-delayed-award-2/ Mon, 11 Apr 2022 07:00:00 +0000 https://mingkem.com/hurry-and-wait-bid-bond-requests-arising-from-a-delayed-award-2/ Claims on contractors’ bid bonds are a risk to be prepared for now more than ever. Bid bonds protect owners against the cost of re-bidding a project if the lowest bidder does not accept the contract. But what if the owner’s delays in selecting a contractor are the catalyst for the claim? Why are project […]]]>

Claims on contractors’ bid bonds are a risk to be prepared for now more than ever. Bid bonds protect owners against the cost of re-bidding a project if the lowest bidder does not accept the contract. But what if the owner’s delays in selecting a contractor are the catalyst for the claim?

Why are project promoters delayed?

As project owners grapple with staffing shortages, the impacts of working from home, and other challenges, considerable time can elapse between the submission of a bid and the owner’s awarding of the contract. The problem is that when an award is delayed, the contractor’s situation may change. Their backlog can grow, material costs and lead times can change significantly, and labor can be shifted to other tasks. In these cases, the contractor may determine that it is no longer possible or economical to perform the contract as originally offered. A contractor refusing the contract will likely cause the project owner to assert a bid bond claim.

How much could it cost?

Understanding the mechanics of the bid bond and the claims process from the outset helps the entrepreneur calculate their exposure and make a business decision on how best to proceed.

  • The amount of the bid bond is a specific percentage (usually five to ten percent) of the bid amount and represents the maximum amount the owner can recover if the contractor refuses the contract.
  • Generally, assuming the claim is valid, the amount owed to the owner is the lesser of the amount of the bond or the difference between the contractor’s lowest bid and the second lowest bid.

What are the lowest bidder options?

After evaluating the bid gap, the amount of the bond and its expected costs to perform the work, the contractor may decide to pay the owner the amount it would otherwise be entitled to recover under the bond, to absorb the increase in costs and pursue the contract, or try to negotiate an alternative solution with the owner.

How does bail help?

As part of the surety’s independent investigation of a bid bond application, the surety will work with the contractor to review the bid solicitation, bid instructions, applicable law, specific bond terms, the bid gap and the bid itself. In certain circumstances, the Owner’s failure to award the Contract in a timely manner will release the Contractor from its obligation to accept the Contract or the Bond from its obligation under the Bond. The bond could also help the contractor to negotiate a practical solution with the owner. Regardless of the circumstances, open communication between the contractor and their surety can help the contractor make the right business decision and limit their exposure.

Contract language can help

To reduce the likelihood of a bid bond being requested, the contractor should consider negotiating the wording of the bid bond with the owner at the outset to compel the prompt issuance of an award or incorporating wording in their proposal. to protect against price increases in the event of a delay. in the price. The Entrepreneur Bond is an excellent resource to help the entrepreneur develop appropriate language to achieve the entrepreneur’s goals and mitigate the risk of exposure to the entrepreneur.

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