The Bid Bond Issue

As most are aware, Round 2021 required suppliers to acquire one $50,000 bid surety bond per CBA (not per product category). The bid bond “liability” (that is, the $50,000 per CBA) would not exist if no contract offer was made in the CBA or, if the supplier did opt to contract, it would expire 90 days after the contract was executed. Suppliers that were offered contracts for the OTS bracing had the option to decline the offer if their bid was higher than the “median bid” for all suppliers within the CBA for the category. The concept of “median bid” may be confusing, as Round 2021 incorporated a “clearing price” bid versus the previous rounds’ median bid. While the median bid for Round 2021 OTS bracing did not set the SPA, it was nevertheless monitored for purposes of enforcing the bid bond. Let me offer an example/visual. I will use a faux “widget” that had a bid limit of $100. The lowest bid that was accepted by the CBIC was $50. The clearing price (where the number of suppliers’ offers in units met the expected demand) was $76.50. As previously noted, all suppliers would be reimbursed at the new SPA of $76.50. But nevertheless, there had to be a “middle bidder” among those offered a contract:

Thus, if a supplier bid above that median dollar amount, they could decline the contract. If not, they must accept the contract. In the case of the brace contract offerings, the supplier could see in Connexion whether or not they bid above the median. Which leads us to a most common question: “I only bid in the 13 product categories that were removed. Can I get a bid bond refund?” The quick answer is no. The premium was “earned” upon their payment and the initial credit check required by the surety entity. The statute is clear in that “if no contract was offered” the liability ceases; this does NOT imply that the bidding supplier is entitled to a refund (as no contract was offered).