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(i) Unless the
contracting officer makes a written determination
supported by specific findings that a payment bond in
this amount is impractical, the amount of the payment
bond must equal-
|
(A) 100
percent of the original contract price; and
(B) If the
contract price increases, and additional amount
equal to 100 percent of the increase.
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(ii) The amount of
the payment bond must be no less than the amount of the
performance bond.
(c) Contracts
exceeding $30,000 but not exceeding $150,000. Unless
the contracting officer determines that a lesser amount
is adequate for the protection of the Government, the
penal amount of the payment bond or the amount of
alternative payment protection must equal--
|
(1) 100
percent of the original contract price; and
(2) If the
contract price increases, an additional amount
equal to 100 percent of the increase.
|
(d) Securing
additional payment protection. If the contract price
increases, the Government must secure any needed
additional protection by directing the contractor to-
|
(1)
Increase the penal sum of the existing bond;
(2) Obtain
an additional bond; or
(3)
Furnish additional alternative payment
protection.
|
(e)
Reducing amounts. The contracting officer may reduce
the amount of security to support a bond, subject to the
conditions of
28.203-5(c)
or
28.204(b).
(a) Insert a
clause substantially the same as the clause at
52.228-15,
Performance and Payment Bonds -- Construction, in
solicitations and contracts for construction that
contain a requirement for performance and payment bonds
if the resultant contract is expected to exceed
$150,000. The contracting officer may revise paragraphs
(b)(1) and/or (b)(2) of the clause to establish a lower
percentage in accordance with
28.102-2(b).
If the provision at
52.228-1
is not included in the solicitation, the contracting
officer must set a period of time for return of executed
bonds.
(b) Insert
the clause at
52.228-13,
Alternative Payment Protections, in solicitations and
contracts for construction, when the estimated or actual
value exceeds $30,000 but does not exceed $150,000.
Complete the clause by specifying the payment
protections selected (see
28.102-1(b)(1)) and the
deadline for submission. The contracting officer may
revise paragraph (b) of the clause to establish a lower
percentage in accordance with
28.102-2(c).
(a)
Generally, agencies shall not require performance and
payment bonds for other than construction contracts.
However, performance and payment bonds may be used as
permitted in
28.103-2
and
28.103-3.
(b) The contractor
shall furnish all bonds before receiving a notice to
proceed with the work.
(c) No bond shall
be required after the contract has been awarded if it
was not specifically required in the contract, except as
may be determined necessary for a contract modification.
(a) Performance
bonds may be required for contracts exceeding the
simplified acquisition threshold when necessary to
protect the Government's interest. The following
situations may warrant a performance bond:
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(1)
Government property or funds are to be provided
to the contractor for use in performing the
contract or as partial compensation (as in
retention of salvaged material).
(2) A
contractor sells assets to or merges with
another concern, and the Government, after
recognizing the latter concern as the successor
in interest, desires assurance that it is
financially capable.
(3)
Substantial progress payments are made before
delivery of end items starts.
(4)
Contracts are for dismantling, demolition, or
removal of improvements.
|
(b) The Government
may require additional performance bond protection when
a contract price is increased.
(c) The
contracting officer must determine the contractor's
responsibility (see Subpart 9.1) even though a bond has
been or can be obtained.
(a) A payment bond
is required only when a performance bond is required,
and if the use of payment bond is in the Government's
interest.
(b) When a
contract price is increased, the Government may require
additional bond protection in an amount adequate to
protect suppliers of labor and material.
The
contracting officer shall insert a clause substantially
the same as the clause at
52.228-16,
Performance and Payment Bonds--Other than Construction,
in solicitations and contracts that contain a
requirement for both payment and performance bonds. The
contracting officer shall determine the amount of each
bond for insertion in the clause. The amount shall be
adequate to protect the interest of the Government. The
contracting officer shall also set a period of time
(normally 10 days) for return of executed bonds.
Alternate I shall be used when only performance bonds
are required.
(a) Annual
performance bonds only apply to nonconstruction
contracts. They shall provide a gross penal sum
applicable to the total amount of all covered contracts.
(b) When the penal
sums obligated by contracts are approximately equal to
or exceed the penal sum of the annual performance bond,
an additional bond will be required to cover additional
contracts.
The head of the
contracting activity may approve using other types of
bonds in connection with acquiring particular supplies
or services. These types include advance payment bonds
and patent infringement bonds.
Advance payment
bonds may be required only when the contract contains an
advance payment provision and a performance bond is not
furnished. The contracting officer shall determine the
amount of the advance payment bond necessary to protect
the Government.
(a) Contracts
providing for patent indemnity may require these bonds
only if --
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(1) A
performance bond is not furnished; and
(2) The financial responsibility of the
contractor is unknown or doubtful.
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(b) The
contracting officer shall determine the penal sum.
The following
Standard Forms (SF's) and Optional Forms (OF's) shown in
53.301 and 53.302, shall be used, except in foreign
countries, when a bid bond, performance or payment bond,
or an individual surety is required. The bond forms
shall be used as indicated in the instruction portion of
each form:
(a) SF 24,
Bid Bond (see
28.101).
(b) SF 25,
Performance Bond (see
28.102-1 and
28.106-3(b)).
(c) SF 25-A,
Payment Bond (see
28.102-1 and
28.106-3(b)).
(d) SF 25-B,
Continuation Sheet (for SF's 24, 25, and 25-A).
(e) SF 28,
Affidavit of Individual Surety (see
28.203).
(f) SF 34,
Annual Bid Bond (see
28.001).
(g) SF 35,
Annual Performance Bond (see
28.104).
(h) SF 273,
Reinsurance Agreement for a Miller Act Performance Bond
(see
28.202(a)(4)).
(i) SF 274,
Reinsurance Agreement for a Miller Act Payment Bond (see
28.202(a)(4)).
(j) SF 275,
Reinsurance Agreement in Favor of the United States (see
28.202(a)(4)).
(k) SF 1414,
Consent of Surety (see
28.106-5).
(l) SF 1415,
Consent of Surety and Increase of Penalty (see
28.106-3).
(m) SF 1416,
Payment Bond for Other Than Construction Contracts (see
28.103-3
and
28.106-3(b)).
(n) SF 1418,
Performance Bond for Other Than Construction Contracts
(see
28.103-2
and
28.106-3(b)).
(o) OF 90,
Release of Lien on Real Property (see
28.203-5).
(p) OF 91,
Release of Personal Property from Escrow (see
28.203-5).
(a) A new surety
bond covering all or part of the obligations on a bond
previously approved may be substituted for the original
bond if approved by the head of the contracting
activity, or as otherwise specified in agency
regulation.
(b) When a new
surety bond is approved, the contracting officer shall
notify the principal and surety of the original bond of
the effective date of the new bond.
(a) When
additional bond coverage is required and is secured in
whole or in part by the original surety or sureties,
agencies shall use Standard Form 1415, Consent of Surety
and Increase of Penalty. Standard Form 1415 is
authorized for local reproduction, and a copy of the
form is furnished for this purpose in part 53 of the
loose leaf edition of the FAR.
(b) When
additional bond coverage is required and is secured in
whole or in part by a new surety or by one of the
alternatives described in
28.204
in lieu of corporate or individual surety, agencies
shall use Standard Form 25, Performance Bond; Standard
Form 1418, Performance Bond for Other Than Construction
Contracts; Standard Form 25-A, Payment Bond; or Standard
Form 1416, Payment Bond for Other Than Construction
Contracts.
(a) The
contracting officer shall insert the clause at
52.228-2, Additional
Bond Security, in solicitations and contracts when bonds
are required.
(b) In
accordance with Section 806(a)(3) of Pub. L. 102-190, as
amended by Sections 2091 and 8105 of Pub. L. 103-355,
the contracting officer shall insert the clause at
52.228-12, Prospective
Subcontractor Requests for Bonds, in solicitations and
contracts with respect to which a payment bond will be
furnished pursuant to the Miller Act (see
28.102-1), except for
contracts for the acquisition of commercial items as
defined in Subpart 2.1.
(a) When any
contract is modified, the contracting officer shall
obtain the consent of surety if --
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(1) An
additional bond is obtained from other than the
original surety;
(2) No additional bond is required and --
|
(i) The modification is for new work
beyond the scope of the original
contract; or
(ii) The modification does not change
the contract scope but changes the
contract price (upward or downward) by
more than 25 percent or $50,000; or
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(3)
Consent of surety is required for a novation
agreement (see Subpart 42.12).
(b)
When a contract for which performance or payment
is secured by any of the types of security
listed in
28.204
is modified as described in paragraph (a) of
this subsection, no consent of surety is
required.
(c)
Agencies shall use Standard Form 1414, Consent
of Surety, for all types of contracts.
(a) The
surety on the bond, upon its written request,
may be furnished information on the progress of
the work, payments, and the estimated percentage
of completion, concerning the contract for which
the bond was furnished.
(b) When a
payment bond has been provided, the contracting
officer shall, upon request, furnish the name
and address of the surety or sureties to any
subcontractor or supplier who has furnished or
been requested to furnish labor or material for
the contract. In addition, general information
concerning the work progress, payments, and the
estimated percentage of completion may be
furnished to persons who have provided labor or
materials and have not been paid.
(c) When a
payment bond has been provided for a contract,
the head of the agency or designee shall furnish
a certified copy of the bond and the contract
for which it was given to any person who makes a
request therefore and who furnishes an affidavit
that the requester has supplied labor or
materials for such work and payment therefor has
not been made or that the requester is being
sued on such bond. The person who makes the
request shall be required to pay such costs of
preparation as determined by the head of the
agency or designee to be reasonable and
appropriate (see 40 U.S.C. 270(c)).
(d)
Section 806(a)(2) of Pub. L. 102-190, as amended
by Sections 2091 and 8105 of Pub.L.103-355,
requires that the Federal Government provide
information to subcontractors on payment bonds
under contracts for other than commercial items
as defined in Subpart 2.1. Upon the written or
oral request of a subcontractor/supplier, or
prospective subcontractor/supplier, under a
contract with respect to which a payment bond
has been furnished pursuant to the Miller Act,
the contracting officer shall promptly provide
to the requester, either orally or in writing,
as appropriate, any of the following:
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(1) Name and address of the surety or
sureties on the payment bond.
(2) Penal amount of the payment bond.
(3) Copy of the payment bond. The
contracting officer may impose
reasonable fees to cover the cost of
copying and providing a copy of the
payment bond.
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(a) During
contract performance, agencies shall not
withhold payments due contractors or assignees
because subcontractors or suppliers have not
been paid.
(b) If,
after completion of the contract work, the
Government receives written notice from the
surety regarding the contractor's failure to
meet its obligation to its subcontractors or
suppliers, the contracting officer shall
withhold final payment. However, the surety must
agree to hold the Government harmless from any
liability resulting from withholding the final
payment. The contracting officer will authorize
final payment upon agreement between the
contractor and surety or upon a judicial
determination of the rights of the parties.
(c) For
any withholding incident to the labor standards
provisions of the contract, see Part 22.
The
contracting officer will only authorize payment
to subcontractors or suppliers from an ILC (or
any other cash equivalent security) upon a
judicial determination of the rights of the
parties, a signed notarized statement by the
contractor that the payment is due and owed, or
a signed agreement between the parties as to
amount due and owed.
This
subpart prescribes procedures for the use of
sureties to protect the Government from
financial losses.
(a)
Agencies shall obtain adequate security for
bonds (including coinsurance and reinsurance
agreements) required or used with a contract for
supplies or services (including construction).
Acceptable forms of security include --
|
(1) Corporate or
individual sureties or
(2) Any of the types of security
authorized in lieu of sureties by
28.204.
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(b)
Solicitations shall not preclude offerors from
using the types of surety or other security
permitted by this subpart, unless prohibited by
law or regulation.
(a)
|
(1) Corporate sureties offered for bonds
furnished with contracts performed in
the United States, its possessions, or
Puerto Rico must appear on the list
contained in the Department of Treasury
Circular 570, "Companies Holding
Certificates of Authority as Acceptable
Sureties on Federal Bonds and Acceptable
Reinsuring Companies."
(2) The penal amount of the bond should
not exceed the surety's underwriting
limit stated in the Department of the
Treasury circular. If the penal amount
exceeds the underwriting limit, the bond
will be acceptable only if --
|
(i) The amount which exceeds the
specified limit is coinsured or
reinsured and
(ii) The amount of coinsurance
or reinsurance does not exceed
the underwriting limit of each
coinsurer or reinsurer.
|
(3) Coinsurance or reinsurance
agreements shall conform to the
Department of the Treasury regulations
in 31 CFR 223.10 and 223.11. When
reinsurance is contemplated, the
contracting office generally shall
require reinsurance agreements to be
executed and submitted with the bonds
before making a final determination on
the bonds.
(4) When specified in the solicitation,
the contracting officer may accept a
bond from the direct writing company in
satisfaction of the total bond
requirement of the contract. This is
permissible until necessary reinsurance
agreements are executed, even though the
total bond requirement may exceed the
insurer's underwriting limitation. The
contractor shall execute and submit
necessary reinsurance agreements to the
contracting officer within the time
specified on the bid form, which may not
exceed 45 calendar days after the
execution of the bond. The contractor
shall use Standard Form 273, Reinsurance
Agreement for a Miller Act Performance
Bond, and Standard Form 274, Reinsurance
Agreement for a Miller Act Payment Bond,
when reinsurance is furnished with
Miller Act bonds. Standard Form 275,
Reinsurance Agreement in Favor of the
United States, is used when reinsurance
is furnished with bonds for other
purposes.
(b) For contracts performed in a foreign
country, sureties not appearing on
Treasury Department Circular 570 are
acceptable if the contracting officer
determines that it is impracticable for
the contractor to use Treasury listed
sureties.
(c) The Department of the Treasury
issues supplements to Circular 570,
notifying all Federal agencies of
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(1) new approved corporate
surety companies and
(2) the termination of the
authority of any specific
corporate surety to qualify as a
surety on Federal bonds. Upon
receipt of notification of
termination of a company's
authority to qualify as a surety
on Federal bonds, the
contracting officer shall review
the outstanding contracts and
take action necessary to protect
the Government, including, where
appropriate, securing new bonds
with acceptable sureties in lieu
of outstanding bonds with the
named company.
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(d) The Department of the Treasury
Circular 570 may be obtained from the --
U.S. Department of the Treasury
Financial Management Service
Surety Bond Branch
401 14th St., SW, 2nd Floor -- West Wing
Washington, DC 20227.
(a) An individual
surety is acceptable for all types of
bonds except position schedule bonds.
The contracting officer shall determine
the acceptability of individuals
proposed as sureties, and shall ensure
that the surety's pledged assets are
sufficient to cover the bond obligation.
(See
28.203-7
for information on excluded individual
sureties.)
(b) An individual
surety must execute the bond, and the
unencumbered value of the assets
(exclusive of all outstanding pledges
for other bond obligations) pledged by
the individual surety, must equal or
exceed the penal amount of each bond.
The individual surety shall execute the
Standard Form 28 and provide a security
interest in accordance with
28.203-1.
One individual surety is adequate
support for a bond, provided the
unencumbered value of the assets pledged
by that individual surety equal or
exceed the amount of the bond. An
offeror may submit up to three
individual sureties for each bond, in
which case the pledged assets, when
combined, must equal or exceed the penal
amount of the bond. Each individual
surety must accept both joint and
several liability to the extent of the
penal amount of the bond.
(c) If the
contracting officer determines that no
individual surety in support of a bid
guarantee is acceptable, the offeror
utilizing the individual surety shall be
rejected as nonresponsible, except as
provided in
28.101-4.
A finding of nonresponsibility based on
unacceptability of an individual surety,
need not be referred to the Small
Business Administration for a competency
review. (See 19.602-1(a)(2)(i) and 61
Comp. Gen. 456 (1982).)
(d) A contractor submitting an
unacceptable individual surety in
satisfaction of a performance or payment
bond requirement may be permitted a
reasonable time, as determined by the
contracting officer, to substitute an
acceptable surety for a surety
previously determined to be
unacceptable.
(e) When
evaluating individual sureties,
contracting officers may obtain
assistance from the office identified in
28.202(d).
(f) Contracting officers shall obtain
the opinion of legal counsel as to the
adequacy of the documents pledging the
assets prior to accepting the bid
guarantee and payment and performance
bonds.
(g) Evidence of possible criminal or
fraudulent activities by an individual
surety shall be referred to the
appropriate agency official in
accordance with agency procedures.
(a) An individual
surety may be accepted only if a
security interest in assets acceptable
under
28.203-2
is provided to the Government by the
individual surety. The security interest
shall be furnished with the bond.
(b) The value at which the contracting
officer accepts the assets pledged must
be equal to or greater than the
aggregate penal amounts of the bonds
required by the solicitation and may be
provided by one or a combination of the
following methods:
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(1) An
escrow account with a federally
insured financial institution in
the name of the contracting
agency. (See
28.203-2(b)(2)
with respect to Government
securities in book entry form.)
Acceptable securities for
deposit in escrow are discussed
in
28.203-2.
While the offeror is responsible
for establishing the escrow
account, the terms and
conditions must be acceptable to
the contracting officer. At a
minimum, the escrow account
shall provide for the following:
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(i) The account must
provide the contracting
officer the sole and
unrestricted right to
draw upon all or any
part of the funds
deposited in the
account. A written
demand for withdrawal
shall be sent to the
financial institution,
after obtaining the
concurrence of legal
counsel, by the
contracting officer with
a copy to the
offeror/contractor and
to the surety. Within
the time period
specified in the demand,
the financial
institution would pay
the Government the
amount demanded up to
the amount on deposit.
If any dispute should
arise between the
Government and the
offeror/contractor, the
surety, or the
subcontractors or
suppliers with respect
to the offer or
contract, the financial
institution would be
required, unless
precluded by order of a
court of competent
jurisdiction, to
disburse monies to the
Government as directed
by the contracting
officer.
(ii) The financial
institution would be
authorized to release to
the individual surety
all or part of the
balance of the escrow
account, including any
accrued interest, upon
receipt of written
authorization from the
contracting officer.
(iii) The Government
would not be responsible
for any costs
attributable to the
establishment,
maintenance,
administration, or any
other aspect of the
account.
(iv) The financial
institution would not be
liable or responsible
for the interpretation
of any provisions or
terms and conditions of
the solicitation or
contract.
(v) The financial
institution would
provide periodic account
statements to the
contracting officer.
(vi) The terms of the
escrow account could not
be amended without the
consent of the
contracting officer.
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(2) A lien
on real property, subject to the
restrictions in
28.203-2
and
28.203-3.
(a) The Government will accept
only cash, readily marketable
assets, or irrevocable letters
of credit from a federally
insured financial institution
from individual sureties to
satisfy the underlying bond
obligations.
(b) Acceptable assets include --
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(1) Cash, or
certificates of deposit,
or other cash
equivalents with a
federally insured
financial institution;
(2) United States
Government securities at
market value. (An escrow
account is not required
if an individual surety
offers Government
securities held in book
entry form at a
depository institution.
In lieu thereof, the
individual shall provide
evidence that the
depository institution
has
|
(i) placed a
notation against
the individual's
book entry
account
indicating that
the security has
been pledged in
favor of the
respective
agency;
(ii) agreed to
notify the
agency prior to
maturity of the
security; and
(iii) agreed to
hold the
proceeds of the
security subject
to the pledge in
favor of the
agency until a
substitution of
securities is
made or the
security
interest is
formally
released by the
agency.);
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(3) Stocks and bonds
actively traded on a
national U.S. security
exchange with
certificates issued in
the name of the
individual surety.
National security
exchanges are --
|
(i) the New York
Stock Exchange;
(ii) the
American Stock
Exchange;
(iii) the Boston
Stock Exchange;
(iv) the
Cincinnati Stock
Exchange;
(v) the Midwest
Stock Exchange;
(vi) the
Philadelphia
Stock Exchange;
(vii) the
Pacific Stock
Exchange; and
(viii) the
Spokane Stock
Exchange.
These assets
will be accepted
at 90 percent of
their 52-week
low, as
reflected at the
time of
submission of
the bond. Stock
options and
stocks on the
over-the-counter
(OTC) market or
NASDQ Exchanges
will not be
accepted.
Assistance in
evaluating the
acceptability of
securities may
be obtained from
the --
Securities and
Exchange
Commission
Division of
Enforcement
450 Fifth Street
NW
Washington, DC
20549.
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(4) Real property owned
in fee simple by the
surety without any form
of concurrent ownership,
except as provided in
subdivision (c)(3)(iii)
of this subsection, and
located within the 50
United States, its
territories, or
possessions. These
assets will be accepted
at 100 percent of the
most current tax
assessment value
(exclusive of
encumbrances) or 75
percent of the
properties' unencumbered
market value provided a
current appraisal is
furnished (see
28.203-3).
(5) Irrevocable letters
of credit (ILC) issued
by a federally insured
financial institution in
the name of the
contracting agency and
which identify the
agency and solicitation
or contract number for
which the ILC is
provided.
(c) Unacceptable assets
include but are not
limited to --
|
(1) Notes or
accounts
receivable;
(2) Foreign
securities;
(3) Real
property as
follows:
|
(i) Real
property
located
outside
the
United
States,
its
territories,
or
possessions.
(ii)
Real
property
which is
a
principal
residence
of the
surety.
(iii)
Real
property
owned
concurrently
regardless
of the
form of
co-tenancy
(including
joint
tenancy,
tenancy
by the
entirety,
and
tenancy
in
common)
except
where
all
co-tenants
agree to
act
jointly.
(iv)
Life
estates,
leasehold
estates,
or
future
interests
in real
property.
|
(4) Personal
property other
than that listed
in paragraph (b)
of this
subsection (e.g.,
jewelry, furs,
antiques);
(5) Stocks and
bonds of the
individual
surety in a
controlled,
affiliated, or
closely held
concern of the
offeror/contractor;
(6) Corporate
assets (e.g.,
plant and
equipment);
(7) Speculative
assets (e.g.,
mineral rights);
(8) Letters of
credit, except
as provided in
28.203-2(b)(5).
(a) Whenever a
bond with a
security
interest in real
property is
submitted, the
individual
surety shall
provide --
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(1)
Evidence
of title
in the
form of
a
certificate
of title
prepared
by a
title
insurance
company
approved
by the
United
States
Department
of
Justice.
This
list
entitled
List of
Approved
Attorneys,
Abstracters,
and
Title
Companies
is
available
from the
--
Title
Unit,
Land
Acquisition
Section
Land and
Natural
Resource
Division
Department
of
Justice
Washington,
DC 20530
This
title
evidence
must
show fee
simple
title
vested
in the
surety
along
with any
concurrent
owners;
whether
any real
estate
taxes
are due
and
payable;
and any
recorded
encumbrances
against
the
property,
including
the lien
filed in
favor of
the
Government
under
paragraph
(d) of
this
subsection;
(2)
Evidence
of the
amount
due
under
any
encumbrance
shown in
the
evidence
of
title;
(3) A
copy of
the
current
real
estate
tax
assessment
of the
property
or a
current
appraisal
dated no
earlier
than 6
months
prior to
the date
of the
bond,
prepared
by a
professional
appraiser
who
certifies
that the
appraisal
has been
conducted
in
accordance
with the
generally
accepted
appraisal
standards
as
reflected
in the
Uniform
Standards
of
Professional
Appraisal
Practice
as
promulgated
by the
--
Appraisal
Foundation
1029
Vermont
Avenue,
NW
Washington,
DC
20005.
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(b) Failure to
provide evidence
that the lien
has been
properly
recorded will
render the
offeror
nonresponsible.
(c) The
individual
surety is liable
for the payment
of all
administrative
costs of the
Government,
including legal
fees, associated
with the
liquidation of
pledged real
estate.
(d) The
following
format, or any
document
substantially
the same, shall
be used by the
surety and
recorded in the
local recorder's
office when a
surety pledges
real estate on
Standard Form
28, Affidavit of
Individual
Surety.
Lien on Real
Estate
I/we agree that
this instrument
constitutes a
lien in the
amount of $
_________ on the
property
described in
this lien. The
rights of the
United States
Government shall
take precedence
over any
subsequent lien
or encumbrance
until the lien
is formally
released by a
duly authorized
representative
of the United
States. I/we
hereby grant the
United States
the power of
sale of subject
property,
including the
right to satisfy
its reasonable
administrative
costs, including
legal fees
associated with
any sale of
subject
property, in the
event of
contractor
default if I/we
otherwise fail
to satisfy the
underlying ( )
bid guarantee, (
) performance
bond, ( ) or
payment bond
obligations as
an individual
surety on
solicitation/contract
number
________________.
The lien is upon
the real estate
now owned by
me/us described
as follows:
(legal
description,
street address
and other
identifying
description)
in witness
hereof, I/we
have hereunto
affixed my/our
hand(s) and
seal(s) this ___
Day of _____19
__.
Witness:
_____________________
___________
(Seal)
___________
(Seal)
I,
__________________,
a Notary Public
in and for the
(City)
_____________,
(State) _______,
do hereby
certify that
_______________,
a party or
parties to a
certain
Agreement
bearing the date
____ day of
________ 19 __,
and hereunto
annexed,
personally
appeared before
me, the said
______________
being personally
well known to me
as the person(s)
who executed
said lien, and
acknowledged the
same to be
his/her/their
act and deed.
Given under my
hand and seal
this ____ day of
_____
19 __.
_____________________________
Notary Public,
State
My Commission
expires:
An individual
surety may
request the
Government to
accept a
substitute asset
for that
currently
pledged by
submitting a
written request
to the
responsible
contracting
officer. The
contracting
officer may
agree to the
substitution of
assets upon
determining,
after
consultation
with legal
counsel, that
the substitute
assets to be
pledged are
adequate to
protect the
outstanding bond
or guarantee
obligations. If
acceptable, the
substitute
assets shall be
pledged as
provided for in
Subpart 28.2.
(a) After
consultation
with legal
counsel, the
contracting
officer shall
release the
security
interest on the
individual
surety's assets
using the
Optional Form
90, Release of
Lien on Real
Property, or
Optional Form
91, Release of
Personal
Property from
Escrow, or a
similar release
as soon as
possible
consistent with
the conditions
in subparagraphs
(a)(1) and (2)
of this
subsection. A
surety's assets
pledged in
support of a
payment bond may
be released to a
subcontractor or
supplier upon
Government
receipt of a
Federal district
court judgment,
or a sworn
statement by the
subcontractor or
supplier that
the claim is
correct along
with a notarized
authorization of
the release by
the surety
stating that it
approves of such
release.
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(1)
Contracts
subject
to the
Miller
Act.
The
security
interest
shall be
maintained
for the
later of
--
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(i) 1 year following final payment,
(ii) Until completion of any warranty period (applicable only to performance bonds), or
(iii) Pending resolution of all claims filed against the payment bond during the 1-year period following final payment.
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(2)
Contracts
subject
to
alternative
payment
protection
(28.102-1(b)(1)).
The
security
interest
shall be
maintained
for the
full
contract
performance
period
plus one
year.
(3)
Other
contracts
not
subject
to the
Miller
Act.
The
security
interest
shall be
maintained
for 90
days
following
final
payment
or until
completion
of any
warranty
period
(applicable
only to
performance
bonds),
whichever
is
later.
(b) Upon
written
request,
the
contracting
officer
may
release
the
security
interest
on the
individual
surety's
assets
in
support
of a bid
guarantee
based
upon
evidence
that the
offer
supported
by the
individual
surety
will not
result
in
contract
award.
(c) Upon
written
request
by the
individual
surety,
the
contracting
officer
may
release
a
portion
of the
security
interest
on the
individual
surety's
assets
based
upon
substantial
performance
of the
contractor's
obligations
under
its
performance
bond.
Release
of the
security
interest
in
support
of a
payment
bond
must
comply
with the
subparagraphs
(a)(1)
through
(3) of
this
subsection.
In
making
this
determination,
the
contracting
officer
will
give
consideration
as to
whether
the
unreleased
portion
of the
lien is
sufficient
to cover
the
remaining
contract
obligations,
including
payments
to
subcontractors
and
other
potential
liabilities.
The
individual
surety
shall,
as a
condition
of the
partial
release,
furnish
an
affidavit
agreeing
that the
release
of such
assets
does not
relieve
the
individual
surety
of its
obligations
under
the
bond(s).
Insert
the
clause
at
52.228-11
in
solicitations
and
contracts
which
require
the
submission
of bid
guarantees,
performance,
or
payment
bonds.
(a) An
individual
may be
excluded
from
acting
as a
surety
on bonds
submitted
by
offerors
on
procurement
by the
executive
branch
of the
Federal
Government,
by the
acquiring
agency's
head or
designee
utilizing
the
procedures
in
Subpart
9.4. The
exclusion
shall be
for the
purpose
of
protecting
the
Government.
(b) An
individual
may be
excluded
for any
of the
following
causes:
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(1) Failure to fulfill the obligations under any bond.
(2) Failure to disclose all bond obligations.
(3) Misrepresentation of the value of available assets or outstanding liabilities.
(4) Any false or misleading statement, signature or representation on a bond or affidavit of individual surety ship.
(5) Any other cause affecting responsibility as a surety of such serious and compelling nature as may be determined to warrant exclusion.
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(c) An
individual
surety
excluded
pursuant
to this
subsection
shall be
included
on the
List of
Parties
Excluded
from
Federal
Procurement
and
Nonprocurement
Programs.
(See
9.404.)
(d)
Contracting
officers
shall
not
accept
the
bonds of
individual
sureties
whose
names
appear
on the
List of
Parties
Excluded
from
Federal
Procurement
and
Nonprocurement
Programs
(see
9.404)
unless
the
acquiring
agency's
head or
a
designee
states
in
writing
the
compelling
reasons
justifying
acceptance.
(e) An
exclusion
of an
individual
surety
under
this
subsection
will
also
preclude
such
party
from
acting
as a
contractor
in
accordance
with
Subpart
9.4.
(a) Any
person
required
to
furnish
a bond
to the
Government
may
furnish
any of
the
types of
security
listed
in
28.204-1
through
28.204-3
instead
of a
corporate
or
individual
surety
for the
bond.
When any
of those
types of
security
are
deposited,
a
statement
shall be
incorporated
in the
bond
form
pledging
the
security
in lieu
of
execution
of the
bond
form by
corporate
or
individual
sureties.
The
contractor
shall
execute
the bond
forms as
the
principal.
Agencies
shall
establish
safeguards
to
protect
against
loss of
the
security
and
shall
return
the
security
or its
equivalent
to the
contractor
when the
bond
obligation
has
ceased.
(b) Upon
written
request
by any
contractor
securing
a
performance
or
payment
bond by
any of
the
types of
security
listed
in
28.204-1
through
28.204-3,
the
contracting
officer
may
release
a
portion
of the
security
only
when the
conditions
allowing
the
partial
release
of lien
in
28.203-5(c)
are met.
The
contractor
shall,
as a
condition
of the
partial
release,
furnish
an
affidavit
agreeing
that the
release
of such
security
does not
relieve
the
contractor
of its
obligations
under
the
bond(s).
(c) The
contractor
may
satisfy
a
requirement
for bond
security
by
furnishing
a
combination
of the
types of
security
listed
in
28.204-1
through
28.204-3
or a
combination
of bonds
supported
by these
types of
security
and
additional
surety
bonds
under
28.202
or
28.203.
During
the
period
for
which a
bond
supported
by
security
is
required,
the
contractor
may
substitute
one type
of
security
listed
in
28.204-1
through
28.204-3
for
another,
or may
substitute,
in whole
or
combination,
additional
surety
bonds
under
28.202
or
28.203.
Any
person
required
to
furnish
a bond
to the
Government
has the
option,
instead
of
furnishing
a surety
or
sureties
on the
bond, of
depositing
certain
United
States
bonds or
notes in
an
amount
equal at
their
par
value to
the
penal
sum of
the bond
(the Act
of
February
24, 1919
(31
U.S.C.
9303)
and
Treasury
Department
Circular
No. 154
dated
July 1,
1978 (31
CFR Part
225)).
In
addition,
a duly
executed
power of
attorney
and
agreement
authorizing
the
collection
or sale
of such
United
States
bonds or
notes in
the
event of
default
of the
principal
on the
bond
shall
accompany
the
deposited
bonds or
notes.
The
contracting
officer
may --
(a) Turn
securities
over to
the
finance
or other
authorized
agency
official;
or
(b)
Deposit
them
with the
Treasurer
of the
United
States,
a
Federal
Reserve
Bank (or
branch
with
requisite
facilities),
or other
depository
designated
for that
purpose
by the
Secretary
of the
Treasury,
under
procedures
prescribed
by the
agency
concerned
and
Treasury
Department
Circular
No. 154
(exception:
The
contracting
officer
shall
deposit
all
bonds
and
notes
received
in the
District
of
Columbia
with the
Treasurer
of the
United
States).
Any
person
required
to
furnish
a bond
has an
option
to
furnish
a
certified
or
cashier's
check,
bank
draft,
Post
Office
money
order,
or
currency,
in an
amount
equal to
the
penal
sum of
the
bond,
instead
of
furnishing
surety
or
sureties
on the
bonds.
Those
furnishing
checks,
drafts,
or money
orders
shall
draw
them to
the
order of
the
appropriate
Federal
agency.
(a) Any
person
required
to
furnish
a bond
has the
option
to
furnish
a bond
secured
by an
ILC in
an
amount
equal to
the
penal
sum
required
to be
secured
(see
28.204).
A
separate
ILC is
required
for each
bond.
(b) The
ILC
shall be
irrevocable,
require
presentation
of no
document
other
than a
written
demand
and the
ILC (and
letter
of
confirmation,
if any),
expire
only as
provided
in
paragraph
(f) of
this
subsection,
and be
issued/confirmed
by an
acceptable
federally
insured
financial
institution
as
provided
in
paragraph
(g) of
this
subsection.
(c) To
draw on
the ILC,
the
contracting
officer
shall
use the
sight
draft
set
forth in
the
clause
at
52.228-14,
and
present
it with
the ILC
(including
letter
of
confirmation,
if any)
to the
issuing
financial
institution
or the
confirming
financial
institution
(if
any).
(d) If
the
contractor
does not
furnish
an
acceptable
replacement
ILC, or
other
acceptable
substitute,
at least
30 days
before
an ILC's
scheduled
expiration,
the
contracting
officer
shall
immediately
draw on
the ILC.
(e) If,
after
the
period
of
performance
of a
contract
where
ILCs are
used to
support
payment
bonds,
there
are
outstanding
claims
against
the
payment
bond,
the
contracting
officer
shall
draw on
the ILC
prior to
the
expiration
date of
the ILC
to cover
these
claims.
(f) The
period
for
which
financial
security
is
required
shall be
as
follows:
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(1) If used as a bid guarantee, the ILC should expire no earlier than 60 days after the close of the bid acceptance period.
(2) If used as an alternative to corporate or individual sureties as security for a performance or payment bond, the offeror/contractor may submit an ILC with an initial expiration date estimated to cover the entire period for which financial security is required or an ILC with an initial expiration date that is a minimum period of one year from the date of issuance. The ILC shall provide that, unless the issuer provides the beneficiary written notice of non-renewal at least 60 days in advance of the current expiration date, the ILC is automatically extended without amendment for one year from the expiration date, or any future expiration date, until the period of required coverage is completed and the contracting officer provides the financial institution with a written statement waiving the right to payment. The period of required coverage shall be:
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(i) For contracts subject to the Miller Act, the later of --
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(A) One year following the expected date of final payment;
(B) For performance bonds only, until completion of any warranty period; or
(C) For payment bonds only, until resolution of all claims filed against the payment bond during the one-year period following final payment.
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(ii) For contracts not subject to the Miller Act, the later of --
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(A) 90 days following final payment; or
(B) For performance bonds only, until completion of any warranty period.
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(g) Only federally insured financial institutions rated investment grade or higher shall issue or confirm the ILC. Unless the financial institution issuing the ILC had letter of credit business of at least $25 million in the past year, ILCs over $5 million must be confirmed by another acceptable financial institution that had letter of credit business of at least $25 million in the past year.
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(1) The offeror/contractor shall provide the contracting officer a credit rating from a recognized commercial rating service as specified in Office of Federal Procurement Policy Pamphlet No. 7 (see 28.204-3(h)) that indicates the financial institution has the required rating(s) as of the date of issuance of the ILC.
(2) If the contracting officer learns that a financial institution's rating has dropped below the required level, the contracting officer shall give the contractor 30 days to substitute an acceptable ILC or shall draw on the ILC using the sight draft in paragraph (g) of the clause at 52.228-14.
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(h)
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(1) Additional information on credit rating services and investment grade ratings is contained within Office of Federal Procurement Policy Pamphlet No. 7, Use of Irrevocable Letters of Credit. This pamphlet may be obtained by calling the Office of Management and Budget's publications office at (202) 395-7332.
(2) A copy of the Uniform Customs and Practice (UCP) for Documentary Credits, 1993 Revision, International Chamber of Commerce Publication No. 500, is available from:
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ICC Publishing, Inc.
156 Fifth Avenue
New York NY 10010
Telephone: (212) 206-1150
Telefax: (212) 633-6025
E-mail: iccpub@interport.net
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Insert the clause at 52.228-14, Irrevocable Letter of Credit, in solicitations and contracts for services, supplies, or construction, when a bid guarantee, or performance bonds, or performance and payment bonds are required.
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Performance and Payment Bonds and Alternative Payment
Protections for Construction Contracts.
