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Secrets of Bonding 76: The Second Bidder’s Second Chance

Secrets of Bonding 76: The Second Bidder’s Second Chance

In this article we will talk about some opportunities that may exist for second bidders. These are the contractors that have come in second in a competitive bidding project, such as a federal or state contract. These projects are generally awarded to the “lowest responsible bidder” (which means they must have the proper credentials and meet other requirements). As for the second bidder, they get nothing. They were close, but they didn’t win. It is a 100% waste of time and money, unless they finally acquire the project. A project may be awarded to the second bidder under certain circumstances, such as a defect in the lowest bidder’s paperwork.

There are many documents required in a typical tender proposal: Licenses, certifications, references, affidavits of non-collusion, business registration, bond consent, tender guarantees, etc. If documents are missing or issued with defects, the lowest bid can be declared. “not responding” at the discretion of the project owner. The second bidder then becomes the lowest responsible bidder and may be awarded the contract.

Here are some of the technical areas to check that can cause rejection of bids:

1. Mandatory forms Do not use mandatory forms, use obsolete / expired forms or do not follow a stipulated format. Does the invitation to tender contain a Section Bonds  tender bond form described as mandatory? Bid bonds are all similar, but failure to use the correct format or document is a potential cause for rejection.

2. Bid bond details Verify that all written information is accurate.

a. Name of the bidders

B. Name of the obligee

C. Job description and project number

D. Percentage of the offer bond or dollar amount

3. Limited offer bonds If a “limited offer bond” is used, a proposal amount that exceeds the maximum of the offer bond would invalidate the instrument. (More information in Secret # 68)

4. T List Requirement If a “Treasury Listed” surety is required, is the surety company listed and for a sufficient amount? http://www.publicdebt.treas.gov/fsreports/ref/suretyBnd/c570.htm

5. Power of Attorney Is one attached, with the correct name, duly executed and for a sufficient amount?

6. Notarial acknowledgment of receipt It is needed both for the surety and for the contractor, duly executed. Is the notary’s commission in the correct state and is it not expired?

7. Execution Signed and stamped with the correct stamps?

8. Is the financial statement of the bond attached? Is it because of the correct name of the bond? Is it on an appropriate (not outdated) date?

9. Bail Consent Not always necessary. However, if stipulated, failure to provide it may lead to a rejection. Are all the details of the consent accurate? Correctly executed, including correct sealing? If there are established conditions, do you comply with the proposal? (Example: consent can only be valid up to a set bid amount).

In public tenders (municipal, state and federal), the tender documents are normally available for public review. Second bidders may be surprised to learn that they have a second chance if the low bid is faulty.

Another second chance may arise if the lowest bidder fails the project after starting the job. In the event of default, the surety company must come to the rescue and you want an efficient (fast and inexpensive) way to complete the job. Who better to call than the second bidder? The second is the natural “completion contractor” to complete the job for warranty. They already know about the project and presumably bid a price close to the lowest bidder. The 2nd must contact the bond claims department that has the Performance Bond.