21.06.07.01

.01 General.

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 his 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 his 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 his 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.