Bid Surety Bonds Fact Sheet
Bidders in Round 2021 of the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program are required, pursuant to 42 CFR §414.412(g), to obtain a bid surety bond in the amount of $50,000 for each competitive bidding area (CBA) for which they submit a bid1. The bid surety bond(s) must be purchased from an authorized surety on the Department of the Treasury’s List of Certified Companies. Bidders must provide proof of having obtained the required bid surety bond(s) by the close of the bid window, and should do so by uploading a copy of the
bond(s) in Connexion, the program’s secure portal.
At the time of contract offer, each bidder meeting the eligibility, financial, and other relevant requirements will be notified whether its composite bid2 is at or below the median composite bid rate for all bidding entities included in the calculation of the single payment amounts in the CBA and product category combination (competition). If a bidder is offered a contract for one or more product categories in a CBA and its composite bid(s) is at or below the median composite bid rate(s), the bidder must accept the contract offer(s) or the bid surety bond for the CBA will be forfeited. A bidder is only required to obtain one bid surety bond per CBA regardless of the number of product categories for which it submits a bid.
Obtaining a Bid Surety Bond
Each bidder must obtain a bid surety bond from an authorized surety on the List of Certified Companies on the Department of the Treasury’s website. Bidders may want to contact the surety that provided their bond for enrollment with the National Supplier Clearinghouse (NSC). It is important to note, however, that bid surety bonds required for bidding in the DMEPOS Competitive Bidding Program are not the same as the surety bonds required for DMEPOS supplier enrollment purposes. To ensure that the bid surety bond complies with requirements noted below, the Centers for Medicare & Medicaid Services (CMS) suggests that bidders provide the surety with this fact sheet and the sample bid surety bond template on the Competitive Bidding Implementation Contractor (CBIC) website. Bidders and sureties should also review information on the bid surety bond requirement in the 2017 final rule to ensure that the bond(s) submitted meets all requirements outlined in 42 CFR §414.412(g).
Bid Surety Bond Requirements
The bid surety bond issued must include at a minimum:
- The bidding entity’s legal business name as the principal/obligor. This is the same company name in the Business Organization Information section of Form A in the DMEPOS Bidding System (DBidS);
- The name and National Association of Insurance Commissioners number of the authorized surety;
- CMS as the named obligee;
- The CBA covered by the bond;
- The bond number;
- The date of issuance;
- The bid surety bond value of $50,000; and
- The conditions of the bond defining when the bond will be subject to forfeiture, as specified in 42 CFR §414.412(g)(3)(i):
- When a bidding entity is offered a contract for a competition and its composite bid for the competition is at or below the median composite bid rate for all bidding entities included in the calculation of the single payment amounts within the competition and the bidding entity does not accept the contract offer, its bid surety bond for that CBA will be forfeited, and CMS will collect on the bond via electronic funds transfer. As one bid surety bond is required for each CBA in which the bidding entity is submitting a bid, the failure to accept a contract offer for any product category within the CBA when the entity's bid is at or below the median composite bid rate will result in forfeiture of the bid surety bond for that CBA.
Bid surety bonds must remain in full force and effect until they are either collected upon by CMS due to forfeiture or the liability is returned for not meeting forfeiture conditions (e.g., a bidding entity is not offered a contract or is offered a contract for a product category where its median composite bid is above the median composite bid rate and the offer is not accepted by the bidding entity). CMS will collect on bid surety bonds that meet the forfeiture conditions from the respective authorized surety upon written notice to the bidding entity and the surety. If a bid does not meet the forfeiture conditions, the bid surety bond liability will be returned to the bidding entity within 90 days of the Round 2021 public announcement of the contract suppliers for the CBA. CMS will notify the bidding entity that it did not meet the forfeiture requirements and the bid surety bond will not be collected by CMS. CMS intends to issue appropriate notice to the surety as well.
Additional Bid Surety Bond Information
- Bidders who do not submit a bid surety bond for each CBA for which they submit a bid(s), will have their bid(s) for the CBA(s) disqualified.
- There are no exceptions, exemptions, or waivers to the bid surety bond requirement.
- Bidders who attempt to avoid forfeiting their bid surety bond(s) by accepting a contract and subsequently not performing under the terms of the contract will have their entire contract terminated, and the bidders will be precluded from participating in the next round of the competitive bidding program in accordance with 42 CFR §414.412(g)(4)(ii).
- Bidders that provide a falsified bid surety bond(s) may be prohibited from participation in the DMEPOS Competitive Bidding Program for both the current and the next round of the program in accordance with 42 CFR §414.412(g)(4)(i). Additionally, these bidders will be referred to the Office of Inspector General and Department of Justice for further investigation.
When a bidding entity receives a contract offer after the initial public announcement of contract suppliers for the CBA, but the contract offer is made within 90 days of the initial public announcement of contract suppliers for the CBA, that entity’s bid surety bond will still be subject to forfeiture if it meets the specified forfeiture conditions in 42 CFR §414.412(g)(3)(i).
1 Bid – an offer to furnish an item or items for a particular price and time period that includes, where appropriate, any services that are directly related to the furnishing of the item or items. 42 CFR §414.402
2Composite Bid – the bid submitted by the supplier for the lead item in the product category. The lead item is the item in a product category with multiple items with the highest total nationwide Medicare allowed charges of any item in the product category prior to each competition. 42 CFR §414.402
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