[Federal Register Volume 61, Number 145 (Friday, July 26, 1996)]
[Rules and Regulations]
[Pages 39212-39217]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-18508]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 28, 52, and 53

[FAC 90-40; FAR Case 91-027; Item XI]
RIN 9000-AE47


Federal Acquisition Regulation; Performance and Payment Bonds

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Civilian Agency Acquisition Council (CAAC) and the Defense 
Acquisition Regulations Council (DARC) have agreed to a final rule 
amending the Federal Acquisition Regulation (FAR) to further 
standardize policies governing bonding. Two new standard clauses are 
added for use when performance or payment bonds are required, and a new 
Standard Form 1418, Performance and Payment Bonds--Other Than 
Construction, is added. This regulatory action was not subject to 
Office of Management and Budget review under Executive Order 12866, 
dated September 30, 1993, and is not a major rule under 5 U.S.C. 804.

EFFECTIVE DATE: September 24, 1996.

FOR FURTHER INFORMATION CONTACT: Mr. Peter O'Such at (202) 501-1759 in 
reference to this FAR case. For general information, contact the FAR 
Secretariat, Room 4037, GS Building, Washington, DC 20405 (202) 501-
4755. Please cite FAC 90-40, FAR Case 91-027.

SUPPLEMENTARY INFORMATION:

A. Background

    FAR 28.101-1, 28.101-2, 28.101-3, 28.102-3, 28.103-2, 28.103-3, 
28.103-4, 28.106-1, 28.106-2, 28.106-3, 52.228-1, and 53.228 are 
revised, and two new clauses are added, 52.228-15, Performance and 
Payment Bonds--Construction, and 52.228-16, Performance and Payment 
Bonds Other Than Construction, to further standardize policies 
governing bonding. A proposed rule was published in the Federal 
Register at 56 FR 31278, July 9, 1991.

B. Regulatory Flexibility Act

    The Department of Defense, the General Services Administration, and 
the National Aeronautics and Space Administration certify that this 
final rule will not 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 merely 
updates, clarifies, and standardizes policy pertaining to performance 
and payment bonds.

C. Paperwork Reduction Act

    The Paperwork Reduction Act (Public Law 96-511) is deemed to apply 
because the final rule contains information collection requirements. 
Accordingly, a request for approval of an extension of an information 
collection requirement concerning Office of Management and Budget (OMB) 
Control Number 9000-0119, Performance and Payment Bonds, was submitted 
to OMB under 44 U.S.C. 3501, et seq., and approved through May 31, 
1999. Public comments were invited through a subsequent Federal 
Register notice published at 61 FR 19664, April 12, 1996.

List of Subjects in 48 CFR Parts 28, 52, and 53

    Government procurement.


[[Page 39213]]


    Dated: July 16, 1996.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.

    Therefore, 48 CFR parts 28, 52, 53 are amended as set forth below:
    1. The authority citation for 48 CFR parts 28 and 52, and 53 
continues to read as follows:

    Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 28--BONDS AND INSURANCE

    2. Section 28.101-1 is amended by revising paragraph (c) to read as 
follows:


28.101-1  Policy on use.

* * * * *
    (c) The chief of the contracting office may waive the requirement 
to obtain a bid guarantee when a performance bond or a performance and 
payment bond is required if it is determined that a bid guarantee is 
not in the best interest of the Government for a specific acquisition 
(e.g., overseas construction, emergency acquisitions, sole-source 
contracts). Class waivers may be authorized by the agency head or 
designee.

    3. Section 28.101-2 is revised to read as follows:


28.101-2  Solicitation provision or contract clause.

    (a) The contracting officer shall insert a provision or clause 
substantially the same as the provision at 52.228-1, Bid Guarantee, in 
solicitations or contracts that require a bid guarantee or similar 
guarantee. For example, the contracting officer may modify this 
provision--
    (1) To set a period of time that is other than 10 days for the 
return of executed bonds;
    (2) For use in connection with construction solicitations when the 
agency has specified that only separate bid bonds are acceptable in 
accordance with 28.101-1(b);
    (3) For use in solicitations for negotiated contracts; or
    (4) For use in service contracts containing options for extended 
performance.
    (b) The contracting officer shall determine the amount of the bid 
guarantee for insertion in the provision at 52.228-1 (see 28.102-2(c)). 
The amount shall be adequate to protect the Government from loss should 
the successful bidder fail to execute further contractual documents and 
bonds as required. The bid guarantee amount shall be at least 20 
percent of the bid price but shall not exceed $3 million. When the 
penal sum is expressed as a percentage, a maximum dollar limitation may 
be stated.


28.101-3  [Removed and reserved]

    4. Section 28.101-3 is removed and reserved.
    5. Section 28.102-3 is amended by revising paragraph (a) to read as 
follows:


28.102-3  Solicitation requirements and contract clause.

    (a) The contracting officer shall 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 $100,000. The penal amount of 
the performance bonds may be decreased in accordance with 28.102-2(a). 
Where the provision at 52.228-1 is not included in the solicitation, 
the contracting officer shall set a period of time for return of 
executed bonds.
* * * * *


28.103-2  [Amended]

    6. Section 28.103-2 is amended by removing paragraph (b) and 
redesignating paragraphs (c) and (d) as (b) and (c), respectively.


28.103-3  [Amended]

    7. Section 28.103-3 is amended by removing paragraphs (b) and (c) 
and redesignating paragraph (d) as (b).
    8. Section 28.103-4 is added to read as follows:


28.103-4  Contract clause.

    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.
    9. Section 28.106-1 is amended by revising paragraphs (c) and (m); 
redesignating paragraphs (n) and (o) as (o) and (p) and adding a new 
paragraph (n) to read as follows:


28.106-1  Bonds and bond related forms.

* * * * *
    (c) SF 25-A, Payment Bond (see 28.102-1 and 28.106-3(b)).
* * * * *
    (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)).
* * * * *
    10. Section 28.106-2 is amended by revising paragraph (a) to read 
as follows:


28.106-2  Substitution of surety bonds.

    (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.
* * * * *
    11. Section 28.106-3 is amended by revising paragraph (b) to read 
as follows:


28.106-3  Additional bond or security.

* * * * *
    (b) When additional coverage is furnished in whole or in part by a 
new 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.
* * * * *

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    12. Section 52.228-1 is revised to read as follows:


52.228-1  Bid Guarantee.

    As prescribed in 28.101-2, insert a provision or clause 
substantially as follows:

Bid Guarantee (SEP 1996)-

    (a) Failure to furnish a bid guarantee in the proper form and 
amount, by the time set for opening of bids, may be cause for 
rejection of the bid.
    (b) The bidder shall furnish a bid guarantee in the form of a 
firm commitment, e.g., bid bond supported by good and sufficient 
surety or sureties acceptable to the Government, postal money order, 
certified check, cashier's check, irrevocable letter of credit, or, 
under Treasury Department regulations, certain bonds or notes of the 
United States. The Contracting Officer will return bid guarantees, 
other than bid bonds, (1) to unsuccessful bidders as soon as 
practicable after the opening of bids, and (2) to the successful 
bidder upon execution of contractual documents and bonds (including 
any necessary coinsurance or reinsurance agreements), as required by 
the bid as accepted.-
    (c) The amount of the bid guarantee shall be ________ percent of 
the bid price or $________, whichever is less.-
    (d) If the successful bidder, upon acceptance of its bid by the 
Government within the period specified for acceptance, fails to 
execute all contractual documents or furnish executed bond(s) within 
10 days after

[[Page 39214]]

receipt of the forms by the bidder, the Contracting Officer may 
terminate the contract for default.-
    (e) In the event the contract is terminated for default, the 
bidder is liable for any cost of acquiring the work that exceeds the 
amount of its bid, and the bid guarantee is available to offset the 
difference.

(End of provision)-

    13.-15. Sections 52.228-15 and 52.228-16 are added to read as 
follows:


52.228-15  Performance and Payment Bonds--Construction.-

    As prescribed in 28.102-3(a), insert a clause substantially as 
follows:

Performance and Payment Bonds--Construction (SEP 1996)-

    (a) Definitions. As used in this clause--
    Contract price means the award price of the contract or, for 
requirements contracts, the price payable for the estimated 
quantity; or for indefinite-delivery type contracts, the price 
payable for the specified minimum quantity.
    (b) Unless the resulting contract price is $100,000 or less, the 
successful offeror shall be required to furnish performance and 
payment bonds to the Contracting Officer as follows:
    (1) Performance Bonds (Standard Form 25): (i) The penal amount 
of performance bonds shall be 100 percent of the original contract 
price.
    (ii) The Government may require additional performance bond 
protection when the contract price is increased. The increase in 
protection shall generally equal 100 percent of the increase in 
contract price.
    (iii) The Government may secure additional protection by 
directing the Contractor to increase the penal amount of the 
existing bond or to obtain an additional bond.
    (2) Payment Bonds (Standard Form 25-A):
    (i) The penal amount of payment bonds shall equal--
    (A) 50 percent of the contract price if the contract price is 
not more than $1 million;
    (B) 40 percent of the contract price if the contract price is 
more than $1 million but not more than $5 million; or
    (C) $2.5 million if the contract price is more than $5 million.
    (ii) If the original contract price is $5 million or less, the 
Government may require additional protection if the contract price 
is increased. The penal amount of the total protection shall meet 
the requirement of subparagraph (b)(2)(i) of this clause.
    (iii) The Government may secure additional protection by 
directing the Contractor to increase the penal sum of the existing 
bond or to obtain an additional bond.
    (c) The Contractor shall furnish all executed bonds, including 
any necessary reinsurance agreements, to the Contracting Officer, 
within the time period specified in the Bid Guarantee provision of 
the solicitation, or otherwise specified by the Contracting Officer, 
but in any event, before starting work.
    (d) The bonds shall be in the form of firm commitment, supported 
by corporate sureties whose names appear on the list contained in 
Treasury Department Circular 570, individual sureties, or by other 
acceptable security such as postal money order, certified check, 
cashier's check, irrevocable letter of credit, or, in accordance 
with Treasury Department regulations, certain bonds or notes of the 
United States. Treasury Circular 570 is published in the Federal 
Register, or may be obtained from the U.S. Department of Treasury, 
Financial Management Service, Surety Bond Branch, 401 14th Street, 
NW., 2nd Floor, West Wing, Washington, DC 20227.

(End of clause)


52.228-16  Performance and Payment Bonds--Other Than Construction.

    As prescribed in 28.103-4, insert a clause substantially as 
follows:

Performance and Payment Bonds--Other than construction (SEP 1996)

    (a) Definitions. As used in this clause--
    Contract price means the total amount of the contract for the 
term of the contract (excluding options, if any) or, for 
requirements contracts, the price payable for the estimated 
quantity; or for indefinite-delivery type contracts, the price 
payable for the specified minimum quantity.
    (b) The Contractor shall furnish a performance bond (Standard 
Form 1418) for the protection of the Government in an amount equal 
to ________ percent of the contract price and a payment bond 
(Standard Form 1416) in an amount equal to ________ percent of the 
contract price.
    (c) The Contractor shall furnish all executed bonds, including 
any necessary reinsurance agreements, to the Contracting Officer, 
within ________ days, but in any event, before starting work.
    (d) The Government may require additional performance bond 
protection when the contract price is increased. The Government may 
secure additional protection by directing the Contractor to increase 
the penal amount of the existing bond or to obtain an additional 
bond.
    (e) The bonds shall be in the form of firm commitment, supported 
by corporate sureties whose names appear on the list contained in 
Treasury Department Circular 570, individual sureties, or by other 
acceptable security such as postal money order, certified check, 
cashier's check, irrevocable letter of credit, or, in accordance 
with Treasury Department regulations, certain bonds or notes of the 
United States. Treasury Circular 570 is published in the Federal 
Register, or may be obtained from the U.S. Department of Treasury, 
Financial Management Service, Surety Bond Branch, 401 14th Street, 
NW., 2nd Floor, West Wing, Washington, DC 20227.

(End of clause)

    Alternate I (SEP 1996). As prescribed in 28.103-4, substitute 
the following paragraph (b) for paragraph (b) of the basic clause:
    (b) The Contractor shall furnish a performance bond (Standard 
Form 1418) for the protection of the Government in an amount equal 
to ________ percent of the contract price.

PART 53--FORMS

    16. Section 53.228 is amended by revising paragraph (c); by 
redesignating paragraphs (n) and (o) as (o) and (p) and adding a new 
paragraph (n); in the newly designated paragraph (o) by removing the 
reference ``28.106-1(n)'' and inserting ``28.106-1(o)''; and in the 
newly designated paragraph (p) by removing the reference ``28.106-
1(o)'' and inserting ``28.106-1(p)'' in its place. The revised text 
reads as follows:


53.228  Bonds and insurance.

* * * * *
    (c) SF 25-A (REV. 1/90), Payment Bond. (See 28.106-1(c).)
* * * * *
    (n) SF 1418 (10/93 Ed.), Performance Bond for Other Than 
Construction Contracts. (See 28.106-1(n).)
* * * * *


53.301-1418  [Added]

    17. Standard Form 1418 is added to read as follows:

53.301-1418  Performance Bond for Other Than Construction 
Contracts.

BILLING CODE 6820-EP-P

[[Page 39215]]

[GRAPHIC] [TIFF OMITTED] TR26JY96.000



[[Page 39216]]

[GRAPHIC] [TIFF OMITTED] TR26JY96.001




[[Page 39217]]


[FR Doc. 96-18508 Filed 7-25-96; 8:45 am]
BILLING CODE 6820-EP-P