# COMAR Title 21 — State Procurement Regulations

## Subtitle 06 — Contract Formation and Award

### Chapter 07 — Bid and Contract Security/Bonds

**Authority:** State Finance and Procurement Article, §§12-101, 13-207—13-209, 13-216, and 17-102—17-109, Annotated Code of Maryland

**Administrative History:** Effective date: July 1, 1981 (8:13 Md. R. II-5)

**Administrative History:** Regulations .01A, .02A, and .03A, B amended effective May 6, 1985 (12:9 Md. R. 816)

**Administrative History:** Regulation .02A amended as an emergency provision effective March 17, 1982 (9:6 Md. R. 612); emergency status expired June 30, 1982; adopted permanently effective July 5, 1982 (9:13 Md. R. 1354)

**Administrative History:** Chapter revised effective January 9, 1989 (15:27 Md. R. 3138)

**Administrative History:** Regulation .01A amended effective May 20, 1996 (23:10 Md. R. 733)

**Administrative History:** Regulation .01B amended effective May 20, 1996 (23:10 Md. R. 733); January 26, 1998 (25:2 Md. R. 80)

**Administrative History:** Regulation .01D amended and F adopted effective October 14, 2002 (29:20 Md. R. 1590)

**Administrative History:** Regulation .02A amended effective May 20, 1996 (23:10 Md. R. 733); October 14, 2002 (29:20 Md. R. 1590)

**Administrative History:** Regulation .02B amended and D adopted effective October 14, 2002 (29:20 Md. R. 1590)

**Administrative History:** Regulation .03A, B amended effective May 20, 1996 (23:10 Md. R. 733)

**Administrative History:** Regulation .03C amended effective October 14, 2002 (29:20 Md. R. 1590)

**Administrative History:** Regulation .04 adopted effective May 20, 1996 (23:10 Md. R. 733)

**Administrative History:** Chapter revised as an emergency provision effective March 31, 2007 (34:9 Md. R. 824); revised permanently effective July 16, 2007 (34:14 Md. R. 1246)

**Administrative History:** Regulation .01B amended effective March 16, 2015 (42:5 Md. R. 488)

**Administrative History:** Regulation .01C amended effective May 2, 2022 (49:9 Md. R. 531)

**Administrative History:** Regulation .01F amended effective April 28, 2014 (41:8 Md. R. 473)

**Administrative History:** Regulation .01H, I adopted effective April 28, 2014 (41:8 Md. R. 473)

**Administrative History:** Regulations .02—.08 repealed effective March 16, 2015 (42:5 Md. R. 488)

**Administrative History:** Regulation .09D amended effective March 16, 2015 (42:5 Md. R. 488); January 2, 2017 (43:26 Md. R. 1449)

**Administrative History:** Regulation .10A amended effective January 2, 2017 (43:26 Md. R. 1449)

#### Regulation .01 General.

*COMAR 21.06.07.01*

A. Nothing contained in this chapter prevents a procurement officer from requiring performance or payment bonds, or both, on supply, service, maintenance, or construction-related service contracts if the contract is expected to exceed $100,000.

B. Acceptable security for bid, performance, and payment bonds is limited to:

  (1) A bond in a form satisfactory to the State underwritten by a surety company authorized to do business in this State;

  (2) A bank certified check, bank cashier's check, bank treasurer's check, cash, or trust account;

  (3) Pledge of securities backed by the full faith and credit of the United States government or bonds issued by the State;

  (4) An irrevocable letter of credit in a form satisfactory to the Attorney General and issued by a financial institution approved by the State Treasurer; or

  (5) For performance security on construction contracts, the grant of a mortgage or deed of trust on real property located in the State when:

    (a) Satisfactory to the procurement officer,

    (b) The face amount of the instrument does not exceed 75 percent of the contractor's equity interest in the property, and

    (c) The assignment of the mortgage or deed of trust is recorded in the county land records pursuant to Real Property Article, §3-103, Annotated Code of Maryland.

C. When a vendor or contractor elects to use cash as security for bid, performance, and payment bonds, the following procedural requirements shall be observed:

  (1) The General Accounting Division of the Office of the Comptroller of the Treasury shall be contacted and an appointment made with the head of the General Accounting Division or the head's designee to deliver the cash security;

  (2) An authorized representative of the vendor or contractor shall hand deliver the cash security to the head of the General Accounting Division or the head's designee;

  (3) An indication of the solicitation or contract number, description of the contract, date of bid/proposal opening, and the name of the contracting agency shall be submitted with the cash security;

  (4) The cash security shall be counted publicly in the presence of at least two State employees of the General Accounting Division and the authorized representative of the vendor or contractor; and

  (5) The acceptance of the cash security shall be acknowledged by a written receipt signed by the head of the General Accounting Division or the head's designee, the two employees witnessing the transaction and the vendor/contractor representative witnessing the amount of cash counted. In the case of bid bonds, the written receipt issued by the General Accounting Division shall be included in the vendor's bid package at the time of public opening of bids.

D. Except as provided in §§B and D(3) of Regulation .09 of this chapter, failure of vendors to comply with these procedures regarding bid bonds will result in the determination by the procurement officer that the bid is nonresponsive.

E. Bid or contract security submitted in the form of cash shall be invested by the State Treasurer and the proceeds of any interest earned by this investment shall accrue to the State of Maryland, General Fund, and may not be credited to the account of the vendor/contractor.

F. Any of the forms of security listed in §B of this regulation are permitted unless otherwise stated in the solicitation. Solicitations that require bid security shall include notice to all bidders that bid security shall be in a form of security authorized by this chapter.

G. Nothing in this chapter requires the procurement officer to accept a nonresponsive bid.

H. If a prime contractor on a State contract requires a subcontractor to provide a bid, performance, or payment bond on a procurement contract for services, supplies, or construction-related services, the prime contractor may not require bid, performance, or payment bonding from the subcontractor that is more stringent than the bonding requirements of this chapter.

I. A bid, performance, or payment bond that is provided by a subcontractor shall be accepted by the prime contractor on a State contract if the bond would be acceptable to the State and provided by:

  (1) A surety company authorized to do business in the State; or

  (2) The Maryland Small Business Development Financing Authority.

#### Regulation .02 Submission of Individual Surety Bonds — Repealed

*COMAR 21.06.07.02*

#### Regulation .03 Acceptability of Individual Sureties — Repealed

*COMAR 21.06.07.03*

#### Regulation .04 Security Interests by an Individual Surety — Repealed

*COMAR 21.06.07.04*

#### Regulation .05 Acceptability of Assets — Repealed

*COMAR 21.06.07.05*

#### Regulation .06 Unacceptable Assets — Repealed

*COMAR 21.06.07.06*

#### Regulation .07 Acceptance of Real Property — Repealed

*COMAR 21.06.07.07*

#### Regulation .08 Acceptance of Personal Property — Repealed

*COMAR 21.06.07.08*

#### Regulation .09 Bid Security.

*COMAR 21.06.07.09*

A. General.

  (1) Solicitations on all State construction contracts when the contract is expected to exceed $100,000 require the submission of bid security in an amount equal to at least 5 percent of the amount of the bid or price proposal except that, for bids stating a rate but not a total cost, the bid bond shall be in an amount as determined by the procurement officer. Bid security or evidence of the posting of bid security shall be submitted with the bid or proposal. Bid bonds may be required for any other procurement over $50,000, as determined by the procurement officer. If a contractor fails to accompany its bid with the required bid security, the bid shall be considered nonresponsive and rejected except as provided by §§B and D of this regulation.

  (2) A procurement officer may require a bid security for a bid or proposal for services, supplies, maintenance, or construction-related services if the contract is expected to exceed $50,000. The procurement officer shall set the amount of the security.

B. Failure to Comply. If bid security is provided by a bidder in an amount less than that required by this regulation, the bid shall be rejected as nonresponsive, unless the procurement officer determines that the deficiency in the amount of security provided is insubstantial and acceptance is in the best interests of the State, and that:

  (1) Only one bid or proposal was received, and there is insufficient time to rebid the contract;

  (2) The bid security became inadequate as a result of the correction of a mistake in the bid or proposal, or as a result of a modification in the bid or proposal in accordance with applicable regulations, and the bidder or offeror increased the amount of bid security to required limits within 48 hours after the correction or modification; or

  (3) After consideration of the risks involved and the difference between the lowest bid and the next lowest bid, fiscal advantage could reasonably be expected to accrue to the State from acceptance of the lowest bid.

C. Withdrawal of Bid or Proposal Before Award. If a bidder or offeror is permitted to withdraw a bid or proposal before award because of a mistake in the bid or proposal, action may not be taken against the bid security. Otherwise, action may be taken against the bid security of a bidder or offeror that withdraws a bid or offer.

D. Forms of Bid Bonds.

  (1) The preferred form of a bid bond is as follows:

  (2) Unless prohibited by the solicitation, a bid bond on a form other than the preferred form under §D(1) of this regulation may be accepted if the form provides that the principal and the surety shall be liable under the bond in an amount at least equal to the difference between the amount of the principal's bid and such other amount or amounts for which the obligee may contract with another party to perform as required by the solicitation for which the principal's bid was submitted.

  (3) Extensions of Time for Acceptance of Bid.

    (a) In this subsection, “acceptance period” means the period during which bids remain irrevocable as provided in the solicitation or in COMAR 21.05.02.19A.

    (b) If a solicitation requires a bid bond to contain consent of the surety to an extension of the acceptance period and the bid bond fails to meet that requirement, the bid:

      (i) May not be rejected as nonresponsive on that basis alone during the acceptance period; and

      (ii) Shall be rejected as nonresponsive if written consent to an extension has not been provided by the bidder and the surety during the acceptance period or an additional period of time set by the procurement officer which is approved by the head of the procurement agency.

  (4) Authenticity and Enforceability of Powers of Attorney.

    (a) Any person signing a bid bond as an attorney-in-fact shall include with the bid bond evidence of authority to bind the surety.

    (b) An original, or a photocopy or facsimile of an original, power of attorney is sufficient evidence of such authority.

    (c) For purposes of this section, verified electronic, mechanically-applied and printed signatures, seals and dates on the power of attorney shall be considered original signatures, seals and dates, without regard to the order in which they were affixed.

    (d) The procurement officer shall:

      (i) Treat the failure to provide a signed and dated power of attorney at the time of bid opening as a matter of responsiveness; and

      (ii) Treat questions regarding the authenticity and enforceability of the power of attorney at the time of bid opening as a matter of responsibility. These questions are handled after bid opening.

    (e) If the procurement officer contacts the surety to validate the power of attorney, the contracting officer shall document the file providing, at a minimum, the following information:

      (i) Name of person contacted;

      (ii) Date and time of contact; and

      (iii) Response of the surety.

    (f) If, upon investigation, the surety declares the power of attorney to have been valid at the time of bid opening, the procurement officer may require correction of any technical error with the power of attorney.

    (g) If, upon investigation, the surety declares the power of attorney to have been invalid, the procurement officer shall determine the bid to be nonresponsive and not allow the bidder to substitute a replacement power of attorney or a replacement surety.

BID BOND

#### Regulation .10 Performance and Payment Bonds.

*COMAR 21.06.07.10*

A. Performance Bonds.

  (1) General. A performance bond is required for all construction contracts in excess of $100,000 in the amount equal to at least 100 percent of the contract price. A performance bond may be required for a contract for services, supplies, maintenance, or construction-related services expected to exceed $100,000, as determined by the procurement officer. The performance bond shall be delivered by the contractor to the State not later than the time the contract is executed. If a contractor fails to deliver the required performance bond, the contractor’s bid shall be rejected, its bid security shall be enforced, and award of the contract may be made to the next lowest responsive and responsible bidder.

  (2) Reduction of Amount Before Solicitation. The head of a procurement agency may reduce the amount of the performance bond required before solicitation if, after completing appropriate analysis, it is determined in writing by the head of a procurement agency to be less costly or more advantageous to the State to self-insure a part of the performance of the contractor. An analysis may be made for groups of contracts, or may be made on particular contracts, as the head of a procurement agency chooses. A copy of the analysis shall be available for public inspection.

B. Payment Bonds.

  (1) General. A payment bond is required for all construction contracts in excess of $100,000 in the amount equal to at least 100 percent of the contract price. The payment bond shall be delivered by the contractor to the State not later than the time the contract is executed. If a contractor fails to deliver the required payment bond, the contractor's bid shall be rejected, its bid security shall be enforced, and award of the contract shall be made to the next lowest responsive and responsible bidder.

  (2) Reduction of Amount Before Solicitation. Before solicitation, the head of a procurement agency may reduce the amount of the payment bond to not less than 50 percent of the contract price if a written determination is made that it is in the best interest of the State to do so. Factors to be considered in order to make the determination include, but are not limited to:

    (a) The value and number of subcontracts to be awarded by the contractor; and

    (b) The value of the contract.

C. Forms for Performance and Payment Bonds. The required performance and payment bonds shall be in the form specified in COMAR 21.07.02.10.

#### Regulation .11 Federal Requirements.

*COMAR 21.06.07.11*

To the extent required by federal law or the conditions governing federally assisted procurements, bid, performance, or payment securities are governed by the federal requirements, notwithstanding Regulations .01—.10 of this chapter.