Help troubleshoot bagels -giant ugly blisters

...so I'll give it a go with your formula & recipe and see what happens. Could you post your first choice formula? Thanks.

That looks to me like a problem that formed when shaping.  Make sure to knock out all of the air bubbles before shaping, and use the shaping method that starts with making a rope first, then rolling it around your hand, as opposed to the method of pulling a hole out of a roll.

I think it is an excellent recipe and I made a test batch of twelve bagels with it. They have a dense but soft, chewy crumb. Perfect. However, I did perform some tweaks to avoid the bubbles (see recipe at bottom). I also recalculated your ingredients into a standard bakers formula and compared it with the recipe I usually use, and also for the sake of completeness, with Jeffrey Hamelman’s bagel formula (from Bread, p.328 (2013 edition)).

Formula:          Angelfire          Hamelman        Roundhay Bakehouse

Flour               100%               100%                 100%

Water              57%                 58%                   57%

Salt                 1.2%                2%                     2%

Yeast (dry)      1%                   1.3% (IDY)        1.4% (IDY)

Malt powder   1.2%                0.5 (diastatic)     5% (non-diastatic) 

Here are my comments, suggestions, and observations, most of which I bet you've already taken into consideration, but might not have made clear elsewhere in this thread. Apologies if that’s true. Anyway, here goes:

• I assumed the 'yeast (dry)’ in your recipe is Instant Dry Yeast (IDY) not Active Dry but , as you can see from the formulae, it is rather low in your recipe. I suspect you probably require at least 7-8g for this much flour (and 11-12g if you're using active dry yeast). Might that also explain why some of the bagels look a little under-fermented? Though that could easily be due to many other factors, particularly over-proofing. 
• You need a very strong bread flour to make authentic chewy bagels (by which I mean none of those glossy supermarket monstrosities with a hard shell and soft bun-like interior). Chef’s Quality Max Gluten Flour sounds like it is appropriate, but I can’t find its protein percentage online. Plus, according to the one image I did  find, it’s also bromated & bleached unlike the strong bread flour I use (a 14% Manitoba). So I can’t really say anything sensible about your flour except to suggest you check that is 14% protein or higher.
• Your salt looks a little low in the formula. A lot of people cut the amount of salt thinking it’s a health benefit. It’s true that mass-produced bread contains an unconscionable amount of salt but here too little might lead to runaway fermentation (and not enough flavour). In the real world, the 2% salt in the formulae comes out at only 1.25%.
• If you’re going to use a sponge - an excellent idea- how about taking it a step further as a poolish (with just a pinch of yeast) then fermenting overnight? You will get an even better flavour than you already do. Note that - in the recipe below - to avoid the possibility of the yeast becoming exhausted, I don’t include the full amount in the poolish.
• Desired Dough Temperature - you cannot know what temperature your water should be unless you take into account the flour temperature, the sponge temperature, and also factor in the heat generated by mixing by hand or machine. For a full explanation do a keyword search on TFL for 'Desired Dough Temperature explained’. Or see below in the recipe.
• Is your malt diastatic or non-diastatic? It matters. The non-diastatic variety (of which I use the dark variety) adds flavour and colour. Diastatic does the same job but you need to use a lot less because it also speeds fermentation (which can make timings more than a little tricky). Malted milk powder is a good substitute. Sugar should be regarded as a last resort for the sugar-addicted. It’s probably not a good idea to use honey as this will affect the hydration. Both forms of malt are available online.
• At 5 oz. - 140g - your bagels are v.large: almost twice the standard size I make (80g).
• You’re boiling them in precisely the time window I use (although I flip them over after only 30 seconds). It always works well. As does your shaping technique.
• Try brushing them with egg white before baking because it gives a lovely shiny golden surface.
• You’re probably underbaking with only 12 minutes at 450/400 F (fan), but this could reflect the vigorousness of your oven (have you calibrated it recently?). Maybe try twenty minutes instead (once you’re sure the thermostat is calibrated).
• But none of this explain your bubbles! What I suspect is going wrong is that, in an understandable desire to increase flavour, you are continuing to ferment after shaping. Proofing is not necessary, in fact, as you’ve discovered, proofing creates fermentation bubbles. Large ones. Even a mere thirty minutes proving time for a malted dough can create signs of over-proofing. Bagels are not proved before baking at the two traditional Jewish bakeries I’ve visited, and I’ve adopted that technique with no problems whatsoever. This is the opposite approach to artisinal sourdough baking where large holes are exactly what we’re after. How about switching your overnight cold retard to the bulk ferment stage (which, after all, is only there to improve flavour) then boil and bake immediately after shaping? Fingers crossed, you won't get bubbly bagels again. 

Here’s my amended recipe:

_____________________________________

Timings:

Sponge/Poolish: 12 hours or overnight

Mix & Knead: 15 min

Bulk ferment: 60 min (or until at least doubled in size)

Cold retard:  12-24 hours

Shaping: 10-20 minutes (depending upon quantity)

Water bath: 30-60 sec i(n batches of 4-6)

Bake: 20 min at 450/400F (fan), 220/200℃

_____________________________________

YIELD:  48 bagels

_____________________________________

INGREDIENTS 

Sponge/Poolish:

• Pinch of Instant Dry Yeast
• 2.4kg water (at 75 degrees F/24℃)
• 2.2kg Chef’s Quality Max Gluten Flour (or any extra strong bread flour - 14% protein or higher)

 Dough:

• 7-8g yeast (Instant Dry)
• 2.6kg Chef’s Quality Max Gluten Flour.extra strong bread flour
• 80g salt
• 50g malt powder/malted milk powder/sugar

• 20g baking soda/malt powder.  

METHOD 

1. The day before, in a large mixing bowl combine a large pinch of Instant Dry Yeast, the flour, and 2.4kg water (at 75 degrees F/24℃). Set aside in a warm place for 12 hours or overnight. 
2. Calculate the water temperature you need to achieve the Desired Dough Temperature of 76F (24℃). This is the best way to ensure the yeast is working at its optimal temperature. Add together the sponge temperature, the flour temperature, and an friction factor for the heat introduced by hand or machine kneading (4F/3℃). Subtract this total from 232F (or 75℃) and, voilá, you have the water temperature you need.
3. Add the 2.2kg water (at the correct temperature), the yeast, the second batch of flour (2.2kg), the salt, and the malt. Mix until all the flour is incorporated into the dough.
4. Knead for ten minutes in a stand mixer, scraping the dough hook every three minutes, until a smooth dough forms. The dough temperature should be between 75-80 degrees F (24-27℃) and should pass a windowpane test. If kneading by hand, set aside fifteen minutes for the task (this is a very stiff dough).
5. Bulk ferment for 60 minutes (or until at least doubled in size), then cold retard in a refrigerator overnight or for between 12-24 hours. This will add the flavour so often missing from mass-produced bagels.
6. Remove from fridge one hour before shaping.
7. Pre-heat oven to 450/400F (fan), (220/200℃). 
8. Gently de-gas the dough then divide it into 85-140g (3-5 oz.) pieces according to the size you prefer. 
9. Shape into smooth balls and lay on prepared baking pans or trays.
10. Bring a full pot of water to a boil, adding the 20g baking soda or malt powder (the latter help improve the colouring).
11. Once the pot is simmering, immediately form the bagels by gently flattening then punching a hole through the dough balls with your thumb, then rotating between your two index fingers like an elastic band until the hole is roughly the size of a Ping-Pong ball. 
12. Working in batches of 4-6, place bagels in the simmering water bottom-side up (flip them over as you lift them). Do not over-crowd the pot. Boil for 30-60 seconds, then flip the bagels over and boil for another 30-60 seconds. 
13. Slide bagels onto baking pan so that the smoother side is on top.
14. Bake immediately for 20 minutes, rotating halfway through. 
15. Cool on wire rack.

Question on the ingredients vs. the method instructions. In the ingredients, there is only water in the sponge, but in the Method details there is an additional "Add the 2.2kg water" with the second batch of flour. Is this accurate?

Thanks.