[Federal Register Volume 60, Number 169 (Thursday, August 31, 1995)]
[Rules and Regulations]
[Pages 45376-45378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21628]



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DEPARTMENT OF DEFENSE

48 CFR Parts 228 and 252

[DFARS Case 95-D305]


Defense Federal Acquisition Regulation Supplement; Alternatives 
to Miller Act Bonds

AGENCY: Department of Defense (DoD).

ACTION: Interim rule with request for comment.

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SUMMARY: The Director of Defense Procurement is amending the Defense 
Federal Acquisition Regulation Supplement (DFARS) to provide 
alternatives to Miller Act bond requirements for construction contracts 
between $25,000 and $100,000.

DATES: Effective Date: August 31, 1995.
    Comment Date: Comments on the interim rule should be submitted in 
writing to the address below on or before October 30, 1995, to be 
considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to: 
Defense Acquisition Regulations Council, Attn: Ms. Amy Williams, 
PDUSD(A&T)DP(DAR), IMD 3D139, 3062 Defense Pentagon, Washington, DC 
20301-3062. Telefax number (703) 602-0350. Please cite DFARS Case 95-
D305 

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in all correspondence related to this issue.

FOR FURTHER INFORMATION CONTACT: Ms. Amy Williams, (703) 602-0131.

SUPPLEMENTARY INFORMATION:

A. Background

    This interim DFARS rule provides alternative payment protections 
for construction contracts between $25,000 and $100,000, pending 
implemention of Section 4104(b)(2) of the Federal Acquisition 
Streamlining Act of 1994, Pub. L. 103-355 (FASA), in the FAR. Section 
4104(b)(2) of FASA requires FAR revisions to provide alternatives to 
payment bonds as payment protections for suppliers of labor and 
material under construction contracts between $25,000 and $100,000. 
Federal Acquisition Circular 90-29 (60 FR 34732, July 3, 1995) revised 
FAR Part 13 to exclude construction contracts and subcontracts at or 
below the simplified acquisition threshold ($100,000) from Miller Act 
bond requirements, in accordance with Section 4101(b)(1) of FASA.

B. Regulatory Flexibility Act

    This interim rule may have a significant economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601 et seq., because the rule 
provides alternatives to payment bonds as payment protection for 
construction contracts between $25,000 and $100,000. The objective of 
the rule is to make it easier for small businesses to provide payment 
protections under construction contracts. An Initial Regulatory 
Flexibility Analysis (IRFA) has been prepared and may be obtained from 
the address specified herein. A copy of the IRFA has been submitted to 
the Chief Counsel for Advocacy of the Small Business Administration. 
Comments are invited from small businesses and other interested 
parties. Comments from small entities concerning the affected DFARS 
subparts will be considered in accordance with Section 610 of the Act. 
Such comments must be submitted separately and cite DFARS Case 95-D305 
in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act applies. The applicable OMB Control 
Number is 9000-0045.

D. Determination of Issue an Interim Rule

    A determination has been made under the authority of the Secretary 
of Defense to issue this rule as an interim rule. Urgent and compelling 
reasons exist to promulgate this rule without prior opportunity for 
public comment because it is necessary to provide payment protections 
for construction contracts between $25,000 and $100,000. However, 
comments received in response to this interim rule will be considered 
in formulating the final rule.
List of Subjects in 48 CFR Parts 228 and 252

    Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council
    Therefore, 48 CFR Part 228 and 252 are amended as follows:
    1. The authority citation for 48 CFR Parts 228 and 252 continues to 
read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR Chapter 1.

PART 228--BONDS AND INSURANCE

    2. Sections 228.171, 228.171-1, 228.171-2, and 228.171-3 are added 
to read as follows:


228.171  Alternative payment protections in construction contracts 
between $25,000 and $100,000.

    228.171-1  General. For construction contracts greater than 
$25,000, but not greater than $100,000, the contracting officer shall 
select one or more of the following payment protections which the 
contractor may submit to the Government for the protection of suppliers 
of labor and material:
    (a) A payment bond.
    (b) An irrevocable letter of credit.
    (c) A tripartite escrow agreement. The prime contractor establishes 
an escrow account in a Federally insured financial institution and 
enters into a tripartite escrow agreement with the financial 
institution, as escrow agent, and all of the suppliers of labor and 
material. The escrow agreement shall establish the terms of payment 
under the contract and of resolution of disputes among the parties. The 
Government makes payments to the contractor's escrow account, and the 
escrow agent distributes the payments in accordance with the agreement, 
or triggers the disputes resolution procedures if required.
    (d) Certificates of deposit. The contractor deposits certificates 
of deposit with the contracting officer, in an acceptable form, 
executable by the contracting officer, and immediately refundable in an 
amount equal to the penal amount of the payment bond waived.
    (e) A deposit of the types of security listed in 28.204.


228.171-2  Amount required.

    (a) The requirements at FAR 28.102-2(b), for the amount of payment 
bonds, also apply to the alternative payment protections described in 
228.171-1. In addition, the payment protection must provide protection 
for the full contract performance period plus one year, and must 
authorize the contracting officer to immediately access funds at any 
time within the contracting officer's discretion.
    (b) The requirements at FAR 28.102-2(c), for the penal sum of bonds 
for requirements and indefinite-quantity contracts, also apply to the 
alternative payment protections described in 228.171-1.


228.171-3  Contract clause.

    Use the clause at 252.228-7007, Alternative Payment Protections, in 
solicitations and contracts for construction, when the estimated or 
actual value exceeds $25,000 but does not exceed $100,000. Complete the 
clause by specifying the payment protection or protections selected 
(see 228.171-1), the penal amount required, and the deadline for 
submission.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    3. Section 252.228-7007 is added to read as follows:


252.228-7007  Alternative Payment Protections.

    As prescribed in 228.171-3, use the following clause:

Alternative Payment Protections (Aug. 1995)

    (a) The Contractor shall submit one of the following payment 
protections:
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    (b) The penal sum of the payment protection shall be in the 
amount of $________.
    (c) The submission of the payment protection is required by 
________.
    (d) The payment protection shall provide protection for the full 
contract performance period plus a one-year period, and shall 
authorize the Contracting Officer to immediately access funds at any 
time and withhold funds pending resolution by administrative or 
judicial proceedings or mutual agreement of the parties, except for 
escrow agreements which provide for a disputes resolution procedure.
    (e) Except for escrow agreements which provide their own 
protection procedures, the Contracting Officer is authorized to 
access funds under the payment protection when it has been alleged 
in writing by a supplier of labor or material that nonpayment has 
occurred.
    (f) When a tripartite escrow agreement is used, the Contractor 
shall utilize only suppliers of labor and material who signed the 
escrow agreement.


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(End of clause)

[FR Doc. 95-21628 Filed 8-30-95; 8:45 am]
BILLING CODE 5000-04-M