IN THE UNITED STATES COURT OF FEDERAL CLAIMS ____________________________________ ) LEEWARD CONSTRUCTION, INC., ) ) Plaintiff, ) ) v. ) No. 22-374C ) THE UNITED STATES, ) Filed: June 17, 2022 ) Defendant, ) Reissued: July 5, 20221 ) and ) ) MOHAWK VALLEY MATERIALS, INC., ) ) Defendant-Intervenor. ) ____________________________________ )
OPINION AND ORDER
Plaintiff Leeward Construction, Inc. (“Leeward”) filed this bid protest challenging the
Army Corps of Engineers’ (“Army”) rejection of Leeward’s bid as non-responsive. Leeward
contends the Army erred as a matter of law in determining that a liability limitation in its bid bond
significantly departed from the solicitation’s requirements. Even if its bid bond were
noncompliant, it claims in the alternative that the Army acted arbitrarily and capriciously because
the alleged irregularity was immaterial and should have been waived, especially where the Army
waived an irregularity in the awardee’s bid. The Government and Defendant-Intervenor Mohawk
Valley Materials, Inc. (“Mohawk”) argue that the ambiguities of the bid bond language presented
a defense to enforcement and the Army reasonably relied on decisions by the Government
Accountability Office (“GAO”) finding the same bid bond defective.
1 The Court issued this opinion under seal on June 17, 2022, and directed the parties to file any proposed redactions by June 28, 2022. As the parties did not propose any redactions, the Court reissues the opinion publicly in full. Before the Court are the parties’ Cross-Motions for Judgment on the Administrative
Record. For the reasons discussed below, the Court finds that Leeward is not entitled to judgment
in its favor because: (1) its bid bond did not comply with the solicitation as a matter of law; (2) the
defect in its bid bond was material and not subject to waiver; (3) Leeward has not stated a valid
disparate evaluation challenge; (4) the defect in its bid bond created a defense to enforcement; and
(5) the Army acted rationally in relying on two prior GAO decisions addressing the same bid bond
language. Accordingly, the Government and Mohawk’s Motions are GRANTED, and Leeward’s
Motion is DENIED.
I. BACKGROUND
A. Findings of Fact
On October 27, 2021, the Army issued Invitation for Bids No. W912BU22B0003 (“IFB”)
for maintenance and modification of the General Edgar Jadwin Dam in Honesdale, Pennsylvania.
Admin. R. 263–95, ECF No. 17 (hereafter “AR”).2 The Army sought a contractor to replace the
“riprap” (i.e., stone facing) on the upstream face of the dam and install a new geosynthetic liner to
protect the dam from erosion. AR 309. The project was scheduled to last 455 days. AR 263.
Six bidders submitted bids in response to the IFB. AR 1362–63. Of the six bidders,
Leeward submitted the lowest bid at a cost of $3,887,454. Id. This was $1,112,401 less than the
next lowest proposal submitted by Mohawk. Id. Leeward is a heavy and highway commercial
construction contractor located in Honesdale, Pennsylvania. AR 1367–70. Leeward has been in
the construction business for over 28 years and holds pre-qualifications with state agencies to
perform earthwork, excavation, grading, and geotextile placement. AR 2015–16. The company
2 For ease of reference, citations to the Administrative Record refer to the bates-stamped page numbers rather than the ECF page numbers.
2 had over $44 million in sales in 2019 and 2020, and it has surety bonding up to $60 million. AR
1368, 1411.
The IFB incorporated Federal Acquisition Regulation (“FAR”) 52.228-1(e), which
requires bidders to include a bid guarantee (i.e., bid bond) with their submission. AR 290–91. Bid
bonds are designed to protect a contracting agency from an awardee’s default by compensating the
agency for costs incurred in reprocuring the contract or reissuing the award to a more expensive
runner-up. See Matter of: G2G, LLC, B-416502, 2018 WL 4679148, at *2 (Comp. Gen. Sept. 27,
2018); see also FAR 28.001 (defining “bid guarantee); FAR 28.101-2(b). The FAR’s bid
guarantee provision reads in relevant part:
(a) Failure to furnish a bid guarantee in the proper form and amount, by the time set for opening of bids, may be cause for rejection of the bid.
(b) The bidder shall furnish a bid guarantee in the form of a firm commitment, e.g., bid bond supported by good and sufficient surety or sureties acceptable to the Government . . . .
(c) The amount of the bid guarantee shall be _____ percent of the bid price or _____, whichever is less.
(d) If the successful bidder, upon acceptance of its bid by the Government within the period specified for acceptance, fails to execute all contractual documents or furnish executed bond(s) within 10 days after receipt of the forms by the bidder, the Contracting Officer may terminate the contract for default.
(e) In the event the contract is terminated for default, the bidder is liable for any cost of acquiring the work that exceeds the amount of its bid, and the bid guarantee is available to offset the difference.
FAR 52.228-1. The IFB set the bond amount at the lesser of 20 percent of the bid price or
$3 million. AR 291.
Before submitting its bid, Leeward sought clarification from the Army regarding the form
of its bid bond. AR 2535. On November 29, 2021, Leeward emailed the contracting specialist
who was listed in the IFB as the point of contact for requests for information to “confirm there is
3 not a special bid bond form” that the Army requires. Id.; see AR 269. The contracting specialist
followed up with a phone call to confirm that Leeward had all of the relevant IFB documents. AR
2569. Leeward sought additional clarification whether the Army would accept a bid bond on the
American Institute of Architects Document A310, 2010 edition (“AIA Form A310”). Id. The
contracting specialist responded that there was no special form for bidders to use, and they needed
only to include a bid bond of the requisite amount. Id. Leeward went on to submit a bid bond
with a penal sum of $777,490.94 (20 percent of its bid price) using the AIA Form A310. AR 1318.
Every other bidder used Standard Form 24 (“SF 24”), the bid bond form provided in FAR
28.106-1.3 AR 1289, 1298, 1306, 1334, 1348.
The AIA Form A310 used by Leeward includes a provision that limits the liability of the
bidder in the case of default to “the difference, not to exceed the amount of this Bond, between the
amount specified in said bid and such larger amount for which the [contracting agency] may in
good faith contract with another party[.]” AR 1318. In contrast, SF 24 states that “in the event of
failure to excuse such further contractual documents and give such bonds, [the Principal] pays the
Government for any cost of procuring the work which exceeds the amount of the bid.” AR 1334
(emphasis added). The AIA Form A310 also includes a savings clause, which states in full:
When this bond has been furnished to comply with a statutory or other legal requirement in the location of the Project, any provision in this Bond conflicting with said statutory or legal requirement shall be deemed deleted herefrom and provisions conforming to such statutory or other legal requirement shall be deemed incorporated herein. When so furnished, the intent is that this Bond shall be construed as a statutory bond and not as a common law bond.
AR 1318.
3 The Government takes the position that using the SF 24 was not mandatory even though FAR 28.106-1 states that the form “shall be used . . . when a bid bond . . . is required.” FAR 28.106-1.
4 After identifying Leeward as the lowest bidder, the Army requested information to perform
a technical review. AR 1362. On December 14, 2021, Leeward completed the Army’s pre-award
survey. AR 1364. On December 16, 2021, Leeward submitted supplemental information it
inadvertently omitted from its pre-award survey. AR 1994. On December 27, 2021, Leeward
responded to the Army’s request for supplemental responses to the technical analysis. AR 1999.
Shortly after providing these responses, the Army sent an email to Leeward on January 4, 2022,
stating that it determined Leeward “appear[s] to be technically qualified” and “is a responsive and
responsible contactor for the project.” AR 2074. The Army also sought responses to additional
questions that would need to be addressed “during the contract period;” however, none of the
questions related to Leeward’s bid bond. Id.
Leeward’s work never got off the ground. On January 26, 2021, it received a letter from
the Army rejecting its bid as nonresponsive. AR 2080. The Army’s Contracting Officer (“CO”)
determined the AIA Form A310 includes “limitations which differ significantly from the
requirements of FAR provision 52.228-1.” Id. According to the CO, the form impermissibly
limits liability to “the difference . . . between the amount specified in said bid and the larger amount
for which the [Army] may in good faith contract with another party.” Id. The CO interpreted this
limitation as prohibiting recovery of all excess reprocurement costs—e.g., administrative costs or
the costs of in-house government performance. Id. In support of his conclusion, the CO cited two
GAO decisions “specific on this issue.” Id. (citing G2G and Matter of: Pac. Dredge & Constr.,
LLC, B-418900, 2020 WL 5702107 (Comp. Gen. Sept. 18, 2020)). For these reasons, the Army
rejected Leeward’s bid and instead awarded the contract to Mohawk as the next lowest bidder. AR
2080, 2878.
The Army attempted to notify unsuccessful bidders of the award to Mohawk on April 4
5 and 6, 2022. AR 2879–86. However, the notification email attached a letter dated January 14,
2022, that erroneously indicated Leeward was the awardee. Id. After filing the Administrative
Record in this matter, the Army learned that it had attached the wrong letter to the award
notification, and it promptly corrected the mistake by issuing a new letter on April 20, 2022. See
Govt.’s Unopposed Mot. to Complete the Admin. R. at 2, ECF No. 16; AR 2887–94.
B. Procedural History
On February 3, 2022, Leeward filed a GAO protest challenging the Army’s decision to
reject its bid as nonresponsive. AR 2545. The Army subsequently moved to dismiss Leeward’s
protest. AR 2597. On March 3, 2022, the GAO summarily dismissed the case. AR 2731. The
GAO based the dismissal on the same two prior GAO decisions cited in the CO’s decision letter—
G2G and Pacific Dredge and Construction—which held that the AIA Form A310 did not comply
with FAR 52.228-1(e). Id. The GAO explained that the form limits liability to only replacement
contract costs and the savings clause did not clearly or unambiguously evince the bidder’s intent
to incorporate FAR 52.228-1(e). AR 2734–35.
On April 1, 2022, Leeward filed its Complaint in this Court. See Pl.’s Compl., ECF No. 1.
On April 25, 2022, Leeward filed a Motion for Judgment on the Administrative Record. See Pl.’s
Mot. for J. on Admin. R., ECF No. 18. First, Leeward contends the Army erred in interpreting the
AIA Form A310 as noncompliant with FAR 52.228-1(e). Id. at 20. Second, Leeward contends
the Army misinterpreted FAR 52.228-1(e) because the regulation provides that the bidder is
personally liable for any reprocurement costs regardless of any liability limitation in its bid bond.
Id. at 20–21. Lastly, Leeward argues that even if the AIA Form A310 does not comply with FAR
52.228-1(e), the Army acted arbitrarily and capriciously in rejecting Leeward’s bid for two
reasons: (1) any irregularity was immaterial; and (2) the Army failed to treat Leeward and Mohawk
6 equally by waiving an error in Mohawk’s bid while refusing to waive Leeward’s bid bond
irregularity. Id. at 21.
On May 5, 2022, the Government filed a Cross-Motion for Judgment on the Administrative
Record. See Govt.’s Cross-Mot. for J. on Admin. R., ECF No. 22. On the same day, Mohawk
filed its Cross-Motion for Judgment on the Administrative Record. See Def.-Intervenor’s Cross-
Mot. for J. on Admin. R., ECF No. 21. The Government and Mohawk contend that the Army
properly rejected Leeward’s bid because the AIA Form A310 fails to guarantee payment of all
reprocurement costs in the case of default, and the Army reasonably relied on prior GAO decisions
that held the same with respect to the identical bid bond form. ECF No. 22 at 25; ECF No. 21 at
15–16. They further contend that the Army did not arbitrarily and capriciously reject Leeward’s
bid because the liability limitation was a material irregularity and not subject to waiver, while the
error in Mohawk’s bid was an obvious clerical error that the Army had authority to correct. ECF
No. 22 at 20; ECF No. 21 at 25. Lastly, Mohawk argues that even if the Army acted irrationally
with respect to Leeward’s bid bond, such a mistake is harmless error because Leeward’s bid would
have been rejected anyway after further analysis by the Army. ECF No. 21 at 31.
The motions are now fully briefed. See Pl.’s Reply to Govt.’s Cross-Mot., ECF No. 24;
Pl.’s Reply to Def.-Intervenor’s Cross-Mot., ECF No. 25; Govt.’s Reply, ECF No. 29. The Court
heard oral argument on June 1, 2022.
II. LEGAL STANDARDS
A. Motion for Judgment on the Administrative Record
Rule 52.1(c) of the Rules of United States Court of Federal Claims (“RCFC”) governs
motions for judgment on the administrative record. Such motions are “properly understood as . .
. an expedited trial on the record.” Bannum, Inc. v. United States, 404 F.3d 1346, 1356 (Fed. Cir.
7 2005). In contrast to the standard for summary judgment, “the standard for judgment on the
administrative record is narrower” and involves determining, “given all the disputed and
undisputed facts in the administrative record, whether the plaintiff has met the burden of proof to
show that the [challenged action or] decision was not in accordance with the law.” Martinez v.
United States, 77 Fed. Cl. 318, 324 (2007) (citing Bannum, 404 F.3d at 1357). Therefore, a
genuine issue of disputed fact does not prevent the Court from granting a motion for judgment on
the administrative record. See Bannum, 404 F.3d at 1357.
B. Bid Protest Standard of Review
The Tucker Act, as amended by the Administrative Dispute Resolution Act of 1996
(“ADRA”), provides the Court of Federal Claims with “jurisdiction to render judgment on an
action by an interested party objecting to . . . the award of a contract or any alleged violation of
statute or regulation in connection with a procurement . . . .” 28 U.S.C. § 1491(b)(1). In such
actions, the Court “review[s] the agency’s decision pursuant to the standards set forth in section
706” of the Administrative Procedure Act (“APA”). 28 U.S.C. § 1491(b)(4); see Banknote Corp.
of Am., Inc. v. United States, 365 F.3d 1345, 1350 (Fed. Cir. 2004). Accordingly, the Court
examines whether an agency’s action was “arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A); see Impresa Construzioni Geom.
Domenico Garufi v. United States, 238 F.3d 1324, 1332 n.5 (Fed. Cir. 2001). Under such review,
an “award may be set aside if either: (1) the procurement official’s decision lacked a rational basis;
or (2) the procurement procedure involved a violation of regulation or procedure.” Impresa, 238
F.3d at 1332 n.5. To prevail in a bid protest, “a protestor must show a significant, prejudicial error
in the procurement process.” WellPoint Mil. Care Corp. v. United States, 953 F.3d 1373, 1377
(Fed. Cir. 2020) (quoting Alfa Laval Separation, Inc. v. United States, 175 F.3d 1365, 1367 (Fed.
8 Cir. 1999)). A protestor establishes prejudice by showing “that there was a substantial chance it
would have received the contract award but for that error.” Alfa Laval, 175 F.3d at 1367 (quoting
Statistica, Inc. v. Christopher, 102 F.3d 1577, 1582 (Fed. Cir. 1996)).
In reviewing an agency’s procurement decisions, the Court does not substitute its judgment
for that of the agency. See Redland Genstar, Inc. v. United States, 39 Fed. Cl. 220, 231 (1997);
Cincom Sys., Inc. v. United States, 37 Fed. Cl. 663, 672 (1997); see also M.W. Kellogg Co. v.
United States, 10 Cl. Ct. 17, 23 (1986) (holding that “deference must be afforded to an agency’s
. . . procurement decisions if they have a rational basis and do not violate applicable law or
regulations.”). The disappointed bidder “bears a heavy burden,” and the CO is “entitled to exercise
discretion upon a broad range of issues.” Impresa, 238 F.3d at 1332 (citations and quotes omitted).
This burden “is not met by reliance on [the] pleadings alone, or by conclusory allegations and
generalities.” Bromley Contracting Co. v. United States, 15 Cl. Ct. 100, 105 (1988); see Campbell
v. United States, 2 Cl. Ct. 247, 249 (1983). A procurement decision is rational if “the contracting
agency provided a coherent and reasonable explanation of its exercise of discretion.” Impresa,
238 F.3d at 1333. “[T]hat explanation need not be extensive.” Bannum, Inc. v. United States, 91
Fed. Cl. 160, 172 (2009) (citing Camp v. Pitts, 411 U.S. 138, 142–43 (1973)).
In a protest, the Court applies de novo review to any questions of law. NVT Techs., Inc. v.
United States, 370 F.3d 1153, 1159 (Fed. Cir. 2004). The interpretation of either a bid bond
(analogous to a contract), a solicitation, or procurement regulations present such questions. See
id.; Balboa Ins. Co. v. United States, 775 F.2d 1158, 1160 (Fed. Cir. 1985) (characterizing a surety
as a three-party agreement whereby the principal becomes liable for the debt of an obligor to an
obligee); United States v. Boeing Co., 802 F.2d 1390, 1393 (Fed. Cir. 1986) (“The interpretation
of regulations which are incorporated into government contracts is a question of law which this
9 court is free to resolve.”). Regardless of whether the decision on review is that of the contracting
officer or of the GAO, the Court of Federal Claims does not afford deference on questions of law.
See VS2, LLC v. United States, 155 Fed. Cl. 738, 767 (2021); CBY Design Builders v. United
States, 105 Fed. Cl. 303, 340 (2012) (holding that the degree of deference applied under the
arbitrary-and-capricious standard does not change depending on whether the court is reviewing
the agency-level decision or the GAO’s decision in a subsequent protest, and “[n]o ‘special’
amount of deference, covering questions of law as well as the ultimate decision being reviewed,
can be gleaned from the . . . Federal Circuit precedents”)); see also E.W. Bliss Co. v. United States,
33 Fed. Cl. 123, 135 (1995), aff’d, 77 F.3d 445 (Fed. Cir. 1996). Nor is the Court bound by GAO
decisions, although such decisions are nonetheless considered “instructive” in the context of bid
protests. Centech Grp., Inc. v. United States, 554 F.3d 1029, 1038 n.4 (Fed. Cir. 2009).
III. DISCUSSION
Although this protest presents a matter of first impression, well-established principles of
contract and statutory interpretation guide the Court’s decision. First, as a matter of law, the Court
finds the AIA Form A310 does not comply with FAR 52.228-1(e), and thus did not meet the
requirements of the IFB. Not only is the language of the bid bond’s savings clause ineffective as
an incorporation by reference, it also is ambiguous, at best, whether the form intends to operate as
a statutory bond in response to the requirements of a solicitation in a federal government
procurement. Second, the bid bond irregularity was material and not subject to waiver. Moreover,
Leeward cannot succeed on a disparate evaluation challenge because its bid did not contain a
substantially similar error as Mohawk’s. Lastly, the Army acted rationally in rejecting Leeward’s
bid because the irregularity presented a defense to enforcement. The Army also reasonably relied
on two GAO decisions addressing this exact issue that correctly concluded the bid bond
10 irregularity was a material defect. Because Leeward fails to carry its burden of proving that the
AIA Form A310 complied with the IFB’s requirements, or that the Army acted arbitrarily and
capriciously in determining its bid was nonresponsive, Leeward is not entitled to judgment on the
record.
A. The AIA Form A310 Does Not Comply With FAR 52.228-1(e) as a Matter of Law.
The crux of this dispute is whether the AIA Form A310 limits the Army’s ability to recover
all reprocurement costs in the event it terminated Leeward’s award for default, as required by the
IFB (pursuant to FAR 52.228-1). The parties do not dispute that the bid bond’s language limits
the surety’s liability, such that the bond does not cover excess costs (like administrative costs or
the cost of in-house government performance). ECF No. 18 at 25. The question at issue thus turns
on the legal effect of the bid bond’s savings clause, which Leeward contends unambiguously
incorporates FAR 52.228-1(e) by reference. ECF No. 18 at 25. Taking a slightly different tack,
Leeward argues in its Reply that the savings clause effectively incorporates FAR 52.228-1(e)
because the bid bond operated as a statutory bond. ECF No. 24 at 13. Based on this construction,
Leeward argues that the AIA Form A310 guaranteed the Army recovery of all reprocurement costs
stemming from default, even if the face of the bid bond seemingly excludes excess costs. Id. The
Government and Mohawk respond that the savings clause is ineffective as an incorporation by
reference because it does not affirmatively cite FAR 52.228-1(e), and it is ambiguous whether the
form is meant to operate as a statutory bond under this set of facts. ECF No. 22 at 25; ECF No.
21 at 29.
1. The AIA Form A310 Does Not Incorporate FAR 52.228-1(e) By Reference.
Incorporation by reference “provides a method for integrating material from various
documents into a host document . . . by citing such material in a manner that makes clear that the
11 material is effectively part of the host document as if it were explicitly contained therein.” Zenon
Env’t, Inc. v. U.S. Filter Corp., 506 F.3d 1370, 1378 (Fed. Cir. 2007) (quoting Cook Biotech Inc.
v. Acell, Inc., 460 F.3d 1365, 1376 (Fed. Cir. 2006)). To incorporate material by reference, “the
incorporating contract must use language that is express and clear, so as to leave no ambiguity
about the identity of the document being referenced, nor any reasonable doubt about the fact that
the referenced document is being incorporated into the contract.” Northrop Grumman Info. Tech.,
Inc. v. United States, 535 F.3d 1339, 1344 (Fed. Cir. 2008). Although there are no “magic words,”
the language “must explicitly, or at least precisely, identify the written material being incorporated
and must clearly communicate that the purpose of the reference is to incorporate the referenced
material into the contract.” Id. at 1345–46 (citation omitted); see Callaway Golf Co. v. Acushnet
Co., 576 F.3d 1331, 1346 (Fed. Cir. 2009) (“[M]ere reference to another [document] is not an
incorporation of anything therein.”). Including information such as the “title, date, parties to, or
section headings of any document to be incorporated” serve as compelling evidence that the parties
intend to incorporate the extraneous document or regulation. Northrop Grumman, 535 F.3d at
1346.
The Federal Circuit disfavors wholesale incorporation by reference of a body of
regulations. In Smithson v. United States, the Federal Circuit considered whether a loan and
security agreement incorporated all regulations of the Farmers Home Administration by stating
the agreement “is subject to the present regulations of the [agency] and to its future regulation not
inconsistent with the express provisions hereof.” 847 F.2d 791, 794 (Fed. Cir. 1988). The plaintiff
sued for breach of contract under a theory founded on an agency regulation not stated in the
agreement. Id. at 793. The Federal Circuit affirmed the court’s dismissal of the claim because it
was “highly doubtful” the agency intended to expose itself to such expansive liability by
12 incorporating all agency regulations into the agreement. Id. at 794. Wholesale incorporation by
reference would have made the agency subject to over 1,200 pages of regulations, many of which
were irrelevant to the subject matter of the deal. Id. The Federal Circuit concluded that if this
were the parties’ purpose “they would have explicitly so provided.” Id. In the absence of such
express term, the Court declined to recognize “‘[a] wholly new ground of obligation . . . by mere
implication’ from a general and ambiguous contract provision.” Id. (internal citation omitted); see
Peterson Indus. Depot, Inc. v. United States, 140 Fed. Cl. 485, 491 (2018) (holding that a contract
provision recognizing the parties’ obligation to comply with certain federal statutes was
insufficient to incorporate by reference certain railroad maintenance standards and safety reports).
To effectively incorporate a regulation by reference, a contract must specifically refer to
the regulation so as to give notice to the agency. This can be accomplished, for example, by
attaching the text of the incorporated regulation as an exhibit to the agreement. See Northrop
Grumman, 535 F.3d at 1344 (citing So. Cal. Edison Co. v. United States, 226 F.3d 1349, 1357
(Fed. Cir. 2000)). Requiring overt reference to the incorporated material comports with case law
from other circuits around the country that similarly seeks to protect a contracting party from undue
surprise. See id. at 1345 (citing Standard Bent Glass Corp. v. Glassrobots Oy, 333 F.3d 440, 447
(3d Cir. 2003) (“Incorporation by reference is proper where the underlying contract makes clear
reference to a separate document, the identity of the separate document may be ascertained, and
incorporation of the document will not result in surprise or hardship.”); PaineWebber, Inc. v.
Bybyk, 81 F.3d 1193, 1201 (2d Cir. 1996) (noting that under common law “the paper to be
incorporated into a written instrument by reference must be so referred to and described in the
instrument that the paper may be identified beyond all reasonable doubt”)).
In this case, the language of the AIA Form A310 is too broad and indefinite to constitute a
13 valid incorporation by reference of any particular statutory or other legal requirement, specifically
FAR 52.228-1(e). The savings clause provides that:
When this bond has been furnished to comply with a statutory or other legal requirement in the location of the Project, any provision in this Bond conflicting with said statutory or legal requirement shall be deemed deleted herefrom and provisions conforming to such statutory or other legal requirement shall be deemed incorporated herein.
AR 1318. The apparent intent of this clause is to bring the bid bond into compliance with any
statute or legal requirement in the location of the project that may conflict with its terms. But in
doing so, it fails to refer to any relevant statute or legal requirement with the “detailed particularity”
required by the Federal Circuit. Northrop Grumman, 535 F.3d at 1344. The form does not cite to
the FAR at all (let alone any particular provision of the FAR relevant to bid bonds), nor does it not
state which provision(s) of the bid bond should be deleted in the event of a conflict. Like the
contract provision at issue in Smithson, the form attempts an open-ended “wholesale incorporation
of a mass of regulations,” such that any statute or legal requirement from a nearly indefinable body
of code could apply. 847 F.2d at 794. And unlike the contract provision at issue in Southern
California Edison, Leeward’s bond did not use the judicially-approved language of incorporation
or attach a copy of the FAR regulation intended to be incorporated. See 226 F.3d at 1357. This
absence of notice is exactly the type of issue the Federal Circuit’s incorporation-by-reference
precedent has sought to protect against.
As such, the AIA Form A310’s savings clause is not a valid incorporation by reference of
FAR 52.228-1(e).
2. The AIA Form A310 Does Not Unambiguously Operate as a Statutory Bond When Furnished in Response to an IFB.
Perhaps recognizing the weakness in its incorporation by reference argument, Leeward
focuses its Reply on the statutory nature of the bid bond. It contends the AIA Form A310 complies
14 with FAR 52.228-1(e) because the savings clause states, “[w]hen [this Bond has been furnished to
comply with a statutory or other legal requirement in the location of the Project] the intent is that
this Bond shall be construed as a statutory bond and not as a common law bond.” ECF No. 24 at
10 (quoting AR 1318). According to Leeward, if a bid bond is a statutory bond, courts either “read
omitted statutory/regulatory provisions into the bond” or “hold that a particular
statutory/regulatory provision overrides a conflicting bond provision.” Id. at 11. The Government
replies that the bid bond should not operate as a statutory bond because it is ambiguous whether it
was furnished to comply with a “statutory or other legal requirement in the location of the Project.”
ECF No. 29 at 9 (quoting AR 1318).
As with any contract, courts “begin with the plain language” when interpreting a bid bond.
McAbee Constr., Inc. v. United States, 97 F.3d 1431, 1435 (Fed. Cir. 1996); Am. Cas. Co. of
Reading, Pa. v. Irvin, 426 F.2d 647, 650 (5th Cir. 1970) (“[T]he liability of a surety on a bond
which is plain and unambiguous is governed, like any other contract, by the intention of the parties
as expressed in the instrument.”). A contract term is ambiguous only “when it is susceptible to
two reasonable interpretations.” A–Transp. Nw. Co., Inc. v. United States, 36 F.3d 1576, 1584
(Fed. Cir. 1994). Its contents must be read as a whole and in “a manner that harmonizes and gives
reasonable meaning to all of its provisions.” Banknote, 365 F.3d at 1353; NVT Techs., 370 F.3d
at 1159. The plain language of the contract “must be given that meaning that would be derived
from the contract by a reasonably intelligent person acquainted with the contemporaneous
circumstances.” TEG–Paradigm Envtl., Inc. v. United States, 465 F.3d 1329, 1338 (Fed. Cir.
2006) (quoting Metric Constructors, Inc. v. Nat’l Aeronautics & Space Admin., 169 F.3d 747, 752
(Fed. Cir. 1999)).
Leeward does not cite a case in this circuit on the proper application of a statutory bond.
15 It instead cites several federal and state court cases. ECF No. 24 at 11. For example, it relies on
Trustees for Michigan Laborers’ Health Care Fund v. Warranty Builders, Inc., where a court in
the Eastern District of Michigan considered whether the notice requirement in a payment bond
should be enforced in accordance with the bond language. 921 F. Supp. 471, 475 (E.D. Mich.
1996). Even though the terms of the payment bond provided a party 90 days after completion of
the work to make a claim against the payment bond, the defendant sought to apply under Michigan
law an additional 30-day period after commencement of the work. Id. The payment bond included
a savings clause identical to the AIA Form A310. Id. The court ultimately applied the 90-day
notice language of the payment bond, but grounded its decision on the absence of directly
conflicting terms between the bond and statute. Id. The court determined that the savings clause
“only acts to delete any contractual provisions which are in conflict with the law,” not incorporate
omitted statutory provisions. Id. at 477. In this sense, the court endorsed application of the savings
clause, but limited it to situations where provisions are directly in conflict with a law to prevent
the surety from profiting “by its own ill-drafted bond notice requirements.” Id.
The problem with applying the AIA Form A310 as a statutory bond here, as in Trustees for
Michigan, is the distinguishable set of facts underlying a federal government procurement. Under
the interpretation advocated by Leeward, if the AIA Form A310 is a statutory bond, it
automatically reads in—and therefore complies with—FAR 52.228-1(e), even if it is not expressly
stated in the form’s terms or incorporated by reference. ECF No. 24 at 23. But unlike in Trustees
for Michigan, where the question at issue was whether a Michigan statutory provision should be
read into a bond posted for a public school construction contract, the bid bond at issue in this case
is not clearly furnished in response to a “statutory or other legal requirement in the location of the
project.” 921 F. Supp. at 475. Indeed, Leeward’s claim that its bid bond constituted a statutory
16 bond is belied by ambiguity in two ways.
First, the FAR is a federal regulation, not a statute. Although there seems no reason to
draw a distinction between a federal regulation and a statute in the context of the bond’s language,
FAR 52.228-1 imposes an obligation on the agency’s contracting officer with respect to the content
of the solicitation and contract. See FAR 28.101-2(a) (“The contracting officer shall insert a
provision or clause substantially the same as the provision at 52.228-1, Bid Guarantee, in
solicitations or contracts that require a bid guarantee or similar guarantee.”). Individual bidders
become bound by the requirements of FAR 52.228-1 only through its insertion in the terms of the
solicitation and the contract awarded by the agency. The phrase “other legal requirement” in the
AIA Form A310 is broad (and not adequately defined by the parties) such that it may encompass
a federal regulation, but the problem remains that Leeward furnished its bid bond in response to
the IFB. This creates significant ambiguity as to whether the bid bond was intended to be construed
as a statutory bond in this case. Leeward has cited no cases addressing application of a statutory
bond to a federal procurement; instead, it cites cases primarily concerning state and city
construction contracts or deals between private parties involving questions about the application
of state statutes. ECF No. 24 at 11 (citing Trustees for Michigan, 921 F. Supp. at 475 (state public
school construction contract involving Michigan Public Works Act); Williamson v. Williams, 247
N.W. 704, 705 (Mich. 1933) (state highway construction contract involving Michigan statutory
provisions requiring payment bonds of contractors on public works, Comp. Law 1929 §§ 13132,
13134); Mayor and City Council of Baltimore v. Fidelity & Deposit Co. of Md., 282 Md. 431, 441
(1978) (city contract for construction of storm drain outfall involving Maryland’s Little Miller
Act); Charles City v. Rasmussen, 232 N.W. 137, 139 (Iowa 1930) (city contract for street
improvements involving Iowa statutory provision requiring contractor and bondsmen to keep
17 improvements in good repair, Code 1924 § 6003,); Am. Cas. Co. of Reading, 426 F.2d at 648 (bond
posted by livestock dealer in Georgia pursuant to the federal Packers And Stockyards Act of 1921).
The applicability of these cases to a bid bond submitted in response to a federal agency’s
solicitation is unclear. As such, it is ambiguous whether the AIA Form A310 should operate as a
statutory bond in this case.
Second, the qualifying phrase “location of the Project” further complicates the applicability
of the savings clause to this case. A “statute or other legal requirement in the location of the
Project” reasonably refers to state or local laws and ordinances in the locality where the project
will be performed. The AIA Form A310 presumably includes this phrase to ensure that contractors
can use the standard-form bid bond in any jurisdiction without the concern that state or local rules
applicable in a particular jurisdiction will invalidate the bond. There is no indication, however,
that the phrase should be applied so broadly as to encompass any federal statute, regulation, or
other legal requirement relevant to a federal procurement—and specifically here, the FAR. Indeed,
the FAR does not apply because of the location of the project but rather because of the entity—
i.e., a federal executive agency—that is seeking to acquire supplies and services with appropriated
funds. See FAR 104.1 (“The FAR applies to all acquisitions as defined in part 2 of the FAR,
except where expressly excluded.”); FAR 2.101 (defining “acquisition”). Although the federal
government may own or possess the dam and/or the land on which it is situated, the location of
the project is Honesdale, Pennsylvania. AR 263. Even if Leeward furnished its bond to comply
with a federal regulation (and not simply the terms of the IFB), it did not do so to comply with a
“legal requirement in the location of the Project,” AR 1318, meaning the statutory bond language
of the savings clause is ineffective in this case.
Accordingly, the AIA Form A310 does not effectively incorporate FAR 52.228-1(e)
18 because it cannot be unambiguously construed to operate as a statutory bond where it was
submitted with a bid in response to the IFB. Because its bond did not comply with FAR
52.228-1(e), Leeward is not entitled to judgment on this ground.4
B. The Army Acted Rationally in Rejecting Leeward’s Bid.
Regardless of whether the AIA Form A310 was noncompliant with the IFB, Leeward must
show that the Army acted arbitrarily and capriciously in rejecting its bid as nonresponsive. The
parties offer competing arguments on this point, raising three questions for the Court’s resolution:
(1) whether the noncompliant language in Leeward’s bid bond was an immaterial defect; (2)
whether the Army treated bidders unequally by correcting an error in Mohawk’s bid while
rejecting Leeward’s bid as nonresponsive; and (3) whether the Army reasonably rejected the bond
because the noncompliant language created a defense to enforcement.
1. The Defect in Leeward’s Bid Bond Was Material.
Leeward contends the Army’s rejection of its bid lacked a rational basis because—even
assuming Leeward’s bid bond was defective—the agency should have concluded that any
irregularity was immaterial and subject to waiver. ECF No. 18 at 30. According to Leeward, the
4 Leeward also contends the Army misinterpreted FAR 52.228-1(e) in determining its bid bond was noncompliant because the regulation imposes liability for all reprocurement costs on the bidder, whereas the bid bond need only be available to offset some portion of that amount. ECF No. 18 at 28. This interpretation is easily rejected as inconsistent with a plain reading of the regulation. See Shoshone Indian Tribe of the Wind River Rsrv. v. United States, 364 F.3d 1339, 1345 (Fed. Cir. 2004) (noting that the plain language of a regulation is controlling if a regulation is clear and unambiguous). FAR 52.228-1(e) provides that a bidder is liable for “any cost of acquiring the work that exceeds the amount of its bid” and that the “bid guarantee is available to offset the difference.” The Court agrees with the Government that if a bid bond limits liability in a manner that excludes payment of excess costs then, at least to some degree, it is not “available to offset” the difference between the amount of the bidder’s bid and any cost of acquiring the work. Based on the plain language, the regulation unambiguously requires a bid bond to protect the agency in the event of default to the same extent that the bidder is liable. To accept Leeward’s interpretation would undercut the very purpose of the bid guarantee itself.
19 immateriality is demonstrated by the fact that the Army would have received the entire benefit of
Leeward’s bid bond because the difference between Leeward’s bid and Mohawk’s bid (as the
next-lowest bidder) far exceeded the penal sum of its bond. ECF No. 18 at 32. In other words,
the bond’s liability limitation would have had no material effect on the Army’s recovery in the
event of default. Id. To support its argument, Leeward relies on FAR 14.405, which provides that
an agency shall give offerors the opportunity to cure or shall waive minor informalities or
irregularities in bids. FAR 14.405 (defining a “minor informality or irregularity” as “one that is
merely a matter of form and not of substance”).
It is well settled that “a proposal that fails to conform to the material terms and conditions
of the solicitation should be considered unacceptable[.]” E.W. Bliss, 77 F.3d at 448; see FAR
14.301(a) (“To be considered for award, a bid must comply in all material respects with the
invitation for bids”). A term is material if it is expressly stated in the solicitation and it adds
“something important to the evaluation of the offer, is binding on the offeror, or has a more than
negligible impact on the price, quantity, or quality of the bid.” ManTech Advanced Sys. Int’l, Inc.
v. United States, 141 Fed. Cl. 493, 506–07 (2019) (collecting cases). An agency is entitled to a
strong presumption of regularity and good faith in evaluating whether a bid is responsive. Am–
Pro Protective Agency, Inc. v. United States, 281 F.3d 1234, 1239–41 (Fed. Cir. 2002).
One type of material deficiency occurs when a bidder submits a defective bid bond or
uncertainty exists at the time of bid opening that the bidder has furnished a sufficient, legally
binding bond. Interstate Rock Prods., Inc. v. United States, 50 Fed. Cl. 349, 361 (2001). In such
case, the bid itself is rendered nonresponsive and generally requires rejection. FAR 28.101–4(a);
see FAR 52.288-1(a). In limited circumstances, the FAR provides that an agency shall waive
noncompliance with a solicitation requirement for a bid guarantee unless it determines acceptance
20 would be detrimental to the Government’s interest. FAR 28.101-4(c) (listing eight situations
where noncompliance shall be waived). The parties do not dispute that none of these waiver
circumstances applied to Leeward’s bid bond.
In this case, the Court finds the Army acted rationally by not waiving the irregularity in the
AIA Form A310 and instead rejecting Leeward’s bid as nonresponsive. As a preliminary matter,
the bid bond requirement was a material aspect of the IFB because it was binding on bidders and
had a more than negligible impact on the quality of the bids. See ManTech Advanced, 141 Fed.
Cl. at 506–07; see also Interstate Rock, 50 Fed. Cl. at 366. The Army inserted the terms of FAR
52.228-1(e) into the IFB, making the bid bond requirements mandatory, and a bidder’s failure to
comply would have put the agency at economic risk of not recovering all reprocurement costs. AR
290–91. Such irregularity was most certainly not “merely a matter of form” but rather “of
substance.” FAR 14.405. Leeward’s attempt to construe the liability limitation in its bid bond as
immaterial is unpersuasive because it discounts the uncertainty accompanying the amount of any
future reprocurement costs. Leeward assumes the Army would have accepted Mohawk’s next
lowest bid in the event of Leeward’s default, but there was no guarantee of that. Mohawk’s bid
expired on April 6, 2022. AR 2663. If the Army had to resolicit the contract, the difference
between Leeward’s bid and the bid of a replacement contractor may not have been so large. The
Army therefore acted rationally in not waiving a material defect that could have subjected it to
prospective economic risks. Indeed, FAR 28.101-4 required the Army to reject Leeward’s bid
because its bid bond was noncompliant with IFB’s bid bond requirements.
2. Leeward Does Not State a Valid Disparate Evaluation Challenge Against the Army for Correcting a Clerical Error in Mohawk’s Bid.
Leeward also contends the Army acted arbitrarily and capriciously by failing to treat all
bidders equally during the evaluation process. ECF No. 18 at 34. It argues the Army gave
21 Mohawk preferential treatment by waiving a mistake in Mohawk’s pricing proposal, whereas it
rejected Leeward’s bid for the irregularity in its bid bond. Id. at 35. The Government and Mohawk
respond that the Army’s treatment of Mohawk’s bid was rational because the IFB permitted the
agency to correct obvious clerical errors. ECF No. 22 at 28; ECF No. 21 at 19–20. The
Government also argues that a claim for disparate evaluation must be founded on identical errors
in the two bids. ECF No. 22 at 28.
To prevail on a claim of disparate evaluation, a protestor must show that the agency
unreasonably downgraded its proposal for deficiencies that were “substantively indistinguishable”
from or “nearly identical” to those contained in other proposals. Office Design Grp. v. United
States, 951 F.3d 1366, 1372 (Fed. Cir. 2020) (citing Enhanced Veterans Sols., Inc. v. United States,
131 Fed. Cl. 565, 588 (2017)); Red River Comput. Co. v. United States, 120 Fed. Cl. 227, 238
(2015). A protestor also may prevail by showing the agency inconsistently applied objective
solicitation requirements among it and the other offerors. Sci. Applications Int’l Corp. v. United
States, 108 Fed. Cl. 235, 272 (2012) (citing BayFirst Sols., LLC v. United States, 102 Fed. Cl. 677
(2012)). If a protestor does not meet this threshold showing, then the court should dismiss the
claim, otherwise it “would give a court free reign to second-guess the agency’s discretionary
determinations underlying its technical ratings.” Office Design Grp., 951 F.3d at 1372.
The Court finds that Leeward has not stated a valid disparate evaluation argument because
the clerical error in Mohawk’s bid was substantially different from the bid bond irregularity that
caused Leeward’s rejection. While the Army determined Leeward’s bid was nonresponsive for
including a limitation on liability that significantly differed from FAR 52.228-1, the Army made
a correction to the calculation of Mohawk’s pricing proposal based on an apparent clerical error.
AR 1362–63. Specifically, Mohawk stated a unit price of $61.71/SY at line item 12 of its bidding
22 schedule. AR 1363. Based on this unit price, the total cost of the line item at a quantity of 31,000
would have been $1,913,010, making Mohawk the fourth highest bidder instead of the runner-up.
As this unit price/total cost was exorbitantly more expensive than other bidders, the Army
reasonably concluded that Mohawk’s unit price contained a decimal point error. Id. The Army
thus adjusted the total estimated price accordingly by adjusting the unit price to $6.17, as was
allowed by the IFP. Id.; AR 270 (“Obviously misplaced decimal points will be corrected[.]”).
This alleged unequal treatment involving the error in Mohawk’s bid was not “substantively
indistinguishable” from the irregularity in Leeward’s bid. Office Design Grp., 951 F.3d at 1372.
3. The Language of Leeward’s Bid Bond Created a Defense to Enforcement.
The Government and Mohawk argue that the Army acted rationally in rejecting Leeward’s
bid because, when faced with ambiguity as to the bid bond’s scope of liability, it reasonably
deferred to two GAO decisions—G2G and Pacific Dredge and Construction—that found the very
same bid bond noncompliant. ECF No. 22 at 22; ECF No. 21 at 15–16.
In those cases, the contracting agencies found the liability limitation in the AIA Form A310
inconsistent with the full scope of protection required by FAR 52.228-1(e) and rejected the
protestors’ bids as nonresponsive. See G2G, B-416502, 2018 WL 4679148, at *2; Pac. Dredge &
Constr., B-418900, 2020 WL 5702107, at *2. Like Leeward, the protestor in G2G argued that the
bid bond incorporated FAR 52.228-1(e) through the savings clause, and thus the conflicting
liability limitation was deemed deleted. See G2G, B-416502, 2018 WL 4679148, at *3. In
reviewing both protests, the GAO defined the determinative question as “whether the bond
establishes unequivocally at the time of bid opening that the bond is enforceable against the surety
should the bidder fail to meet its obligations.” Id. at *3; see Pac. Dredge & Constr., B-418900,
2020 WL 5702107, at *4 (“The test applied in determining the responsiveness of a bid is whether
23 the bid as submitted is an unequivocal offer to perform the exact thing called for in the IFB . . . .”).
It held that “[a] bond is defective and the bid must be rejected” under FAR 28.104-1 “[i]f the
agency cannot determine definitively from the bid bond documents that the surety would be
bound” in the manner required by FAR 52.228-1(e). G2G, B-416502, 2018 WL 4679148, at *3.
The GAO found the savings clause of the AIA Form A310 was, at best, ambiguous. Id. at *4. As
it explained, the plain language of the bond “does not provide clear or unambiguous evidence of
. . . [an] intent to incorporate by reference the solicitation requirements for a bid guarantee to
include the requirements of FAR § 52.228–1.” Id. (noting “it is not clear from the face of the
protester’s bid bond what is meant by the phrase ‘to comply with a statutory or other legal
requirement in the location of the [p]roject,’” and it cannot be inferred that “FAR § 52.228–1, in
whole or in part, is the ‘legal requirement’ that should be ‘deemed incorporated’ into the bid
bond.”). Likewise, in Pacific Dredge and Construction, the GAO repeated its position that the
ambiguous language in the savings clause required the agency to reject the bid. Pac. Dredge &
Constr., B-418900, 2020 WL 5702107, at *5. The GAO’s reasoning was sound and, as explained
above, legally correct.
Another judge of this court upheld an agency’s determination that a bid was nonresponsive
due to a defect in the bid bond where the agency similarly relied on GAO precedent. In Interstate
Rock, the court rejected the plaintiff’s claim that its bid bond complied with the terms of a
solicitation despite the inadvertent omission of a penal sum in the bond. 50 Fed. Cl. at 361. While
the plaintiff maintained the error was immaterial, the agency attached two GAO decisions to its
responsiveness determination holding that the omission of the penal sum on a bond renders the bid
bond defective. Id. at 351–52. Upon review, the court concluded that while it was arguable
whether the omission of the penal sum was in fact a fatal error, the ambiguity nonetheless created
24 a defense to enforcement. Id. at 361; see id. at 362 (“In the view of this court, the omission of the
penal sum creates a potential ambiguity and therefore a defense that either the surety or the
contractor could raise as a defense to enforcement of the bid bond.”). Accordingly, it held the
agency acted rationally by rejecting the bid due to the risk that its validity could be challenged in
future litigation. Id. The court further held that the agency likewise acted reasonably by relying
on GAO precedent, which it found “appl[ied] the standards as set forth in the FAR in a manner
that is eminently rational.” Id. at 363.
In this case, because of the ambiguity in the plain language of AIA Form A310 and in light
of two GAO decisions that found the exact same bond noncompliant, Leeward’s bid bond
presented a defense to enforcement warranting rejection. As the Federal Circuit recently
acknowledged, an agency is not required to accept a bid if it creates a demonstrable risk of future
litigation. See Asset Prot. & Sec. Servs., L.P. v. United States, 5 F.4th 1361, 1366 (Fed. Cir. 2021)
(“[T]he government has a substantial interest in not creating opportunities for litigation . . . and
[is] not obligated to accept a bid that [is] contrary to the amended terms of its solicitation.” ). Nor
can the Court say the Army acted arbitrarily and capriciously by recognizing the ambiguity and
relying on two prior GAO decisions to guide how it should proceed. AR 2080. Although GAO
decisions do not constitute mandatory authority, the arbitrary-and-capricious standard asks
whether an agency lacked a rational basis in making a decision. Impresa, 238 F.3d at 1333. In
the absence of contrary holdings from the Federal Circuit or Court of Federal Claims, the Army
reasonably followed two administrative protest decisions that dealt with an identical bid bond.
As such, the Court finds that the Army acted rationally in determining Leeward’s bid
nonresponsive. Leeward fails to carry its heavy burden of proving the agency’s decision lacked a
25 rational basis. Accordingly, Leeward is not entitled to judgment on this ground.5
IV. CONCLUSION
For the reasons set forth above, Leeward’s Motion for Judgment on the Administrative
Record (ECF No. 18) is DENIED, the Government’s Cross-Motion (ECF No. 22) is GRANTED,
and Mohawk’s Cross-Motion (ECF No. 28) is GRANTED. The Clerk is directed to enter
judgment accordingly.
SO ORDERED.
Dated: June 17, 2022 /s/ Kathryn C. Davis KATHRYN C. DAVIS Judge
5 In light of the Court’s ruling, it is not necessary to address Mohawk’s arguments regarding whether the Army would likely have rejected Leeward’s bid notwithstanding the bid bond issue.