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Surety's Pledge of Mined Coal Was Unacceptable Asset 

According to the Court of Federal Claims, the government reasonably determined a protester's proposal for a construction contract was unacceptable based on the bid bond surety's pledge to secure performance with marketable coal, because the coal was not an acceptable asset under FAR 28.203-2. The invitation for bids gave bidders the option of using individual sureties for the bid bond and required such sureties to provide full representation of their pledged assets. The protester proposed an individual surety whose pledged asset was described as approximately $191 million worth of marketable coal. The contracting officer excluded the protester from competition based on his determination the marketable coal was an unacceptable, "speculative asset" pursuant to FAR 28.203-2(c)(7). The protester appealed the CO's decision in the Government Accountability Office, but the Comptroller General denied the protest (23 CGEN 112,596), finding the coal was an unacceptable asset because it could not be placed in an escrow account as required by FAR 28.203-1(b). In its appeal to the CFC, the protester argued the escrow requirement in FAR 28.203-1(b) only applied to cash assets and the CO had a duty to raise the issue and allow the protester an opportunity to substitute assets pursuant to FAR 28.203-4.
 
FAR Read as a Whole

On cross-motions for judgment on the administrative record, the CFC found the CO reasonably exercised his discretion in finding the coal unacceptable. Whether the coal was an acceptable asset was an issue of responsibility to be determined by the CO in accordance with the principles of FAR Subpart 9.1 and FAR 28.203, which requires a CO to reject an offeror as nonresponsible when the offeror proposes to use a surety whose bid guarantee is unacceptable, and gives the CO discretion in determining whether pledged assets are acceptable. Although the phrase "may be provided" in FAR 28.203-1(b) creates "some degree of ambiguity," when FAR 28.203-1(b) is read in conjunction with FAR Subpart 28.2 as a whole, the provision requires pledged assets other than real property to be deposited into an escrow account in order to be acceptable. The requirement for an escrow account is illustrated by the language of Standard Form 28 and the contract clause at FAR 52.228-11, both of which are required to be executed by individual sureties under FAR Subpart 28.2. To the extent the escrow requirement could be interpreted differently, any ambiguities were patent and thus should have been raised by the contractor prior to submitting its bid. Finally, FAR 28.203-4 permits, but does not require, the CO to allow substitution of assets. Here, the CO reasonably denied substitution based on the fact the protester's surety never submitted a written request for substitution of assets as required by FAR 28.203-4. (Tip Top Construction, Inc. v. U.S., FedCl, 52 CCF 78,977)
 

    (The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )

     
  
 

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