Bid Protest Rejected for Inadequate Bid Bond

The Federal Circuit upheld the rejection of the lowest bidder by the Department of Transportation where the bid bond supplied by the low bidder failed to comply with the Federal Acquisition Regulations (FAR). In Tip Top Construction v. United States, the general contractor submitted a bid bond from an individual surety backed by mined coal. The government rejected the bond because the asset securing the individual security was too speculative and hence did not comply with the FAR's requirements. The invitation to bid required a bid bond of three million or 20 % of the bid amount whichever was less.

In affirming the rejection of the bid, the court emphasized the purpose of the bid bond; namely to protect the government in case the bid is withdrawn. Thus, the assets securing the bond most be sufficiently liquid or marketable to cover the expenses of rebidding the project. The court noted that too many variables impact the pricing of the coal in order to adequately assess its value and liquidity. In short, the coal was a speculative asset and therefore insufficient collateral.

For further questions regarding bid protests, contact Matt Hjortsberg at 410-583-2400 or at Hjortsberg@bowie-jensen.com