[Federal Register Volume 64, Number 248 (Tuesday, December 28, 1999)]
[Proposed Rules]
[Pages 72828-72829]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-33280]



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_______________________________________________________________________

Part IX

Department of Defense

General Services Administration

National Aeronautics and Space Administration
_______________________________________________________________________



48 CFR Parts 28 and 52



Federal Acquisition Regulation; Construction Industry Payment 
Protection Act of 1999; Proposed Rule

  Federal Register / Vol. 64, No. 248 / Tuesday, December 28, 1999 / 
Proposed Rules  

[[Page 72828]]



DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 28 and 52

[FAR Case 1999-302]
RIN 9000-AI60


Federal Acquisition Regulation; Construction Industry Payment 
Protection Act of 1999

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

ACTION: Proposed rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) are proposing to amend the 
Federal Acquisition Regulation (FAR) to implement the Construction 
Industry Payment Protection (CIPP) Act of 1999. The CIPP Act amends the 
Miller Act to provide that the amount of a payment bond must equal the 
total amount payable by the terms of the contract, unless the 
contracting officer determines that a payment bond in that amount is 
impractical. The proposed rule also provides enhanced payment 
protection for Government contracts not subject to the Miller Act. This 
added protection is not required by the CIPP but is considered 
beneficial to add consistency to the rule and to afford added 
protection to subcontractors and suppliers on contracts less than 
$100,000.00.

DATES: Interested parties should submit comments in writing on or 
before February 28, 2000 to be considered in the formulation of a final 
rule.

ADDRESSES: Interested parties should submit written comments to: 
General Services Administration, FAR Secretariat (MVRS), 1800 F Street, 
NW, Room 4035, ATTN: Laurie Duarte, Washington, DC 20405.
    Address e-mail comments submitted via the Internet to: 
[email protected]. Please submit comments only and cite FAR case 
1999-302 in all correspondence related to this case.

FOR FURTHER INFORMATION CONTACT: The FAR Secretariat, Room 4035, GS 
Building, Washington, DC, 20405, at (202) 501-4755 for information 
pertaining to status or publication schedules. For clarification of 
content, contact Ralph O'Neill, Procurement Analyst, at (202) 501-3856. 
Please cite FAR case 1999-302.

SUPPLEMENTARY INFORMATION:

A. Background

    This proposed rule revises FAR 28.102 and the clauses at 52.228-13, 
52.228-15, and 52.228-16 to implement the CIPP Act (Pub. L. 106-49) and 
to enhance payment protection for Government contracts not subject to 
the Miller Act.
    The Miller Act (40 U.S.C. 270a, et seq.) requires contractors 
performing Government construction contracts that exceed $100,000 to 
furnish performance and payment bonds. Previously, the required payment 
bond did not exceed 50 percent of contract price, and was capped at a 
ceiling of $2.5 million.
    The CIPP Act substitutes a requirement that the payment bond 
generally must equal the contract price. In addition, the CIPP Act 
makes two procedural changes to the Miller Act, adding a requirement 
regarding subcontractor waiver of the right to sue on the payment bond, 
and modernizing the requirements for the delivery of notice by 
subcontractors having right of action on the payment bond.
    The proposed rule amends the clause at FAR 52.228-15 to address the 
statutory requirement regarding waiver of the right to sue on the 
payment bond. The delivery of notice by subcontractors having right of 
action on the payment bond is not an issue addressing either the 
contracting officer or the contractor, and is not addressed in the 
proposed rule.
    This rule was not subject to Office of Management and Budget review 
under Section 6(b) of Executive Order 12866, Regulatory Planning and 
Review, dated September 30, 1993. This rule is not a major rule under 5 
U.S.C. 804.

B. Regulatory Flexibility Act

    The changes 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 requires prime 
contractors to provide increased payment protection for subcontractors 
that furnish labor or materials on Federal construction projects. An 
Initial Regulatory Flexibility Analysis (IRFA) has been prepared and 
will be provided to the Chief Counsel for Advocacy for the Small 
Business Administration. The analysis is summarized as follows:

    The primary objective of this rule is to enhance payment 
protection for subcontractors that furnish labor or materials on 
Federal construction projects. The rule will require all contractors 
to which the Government awards construction contracts exceeding 
$25,000 to obtain a payment bond equal to the contract price, unless 
the contracting officer determines that to be impractical or 
unnecessary. The rule is expected to benefit subcontractors seeking 
payment, without resulting in substantial price increases for the 
prime contractor obtaining the increased payment protection. We 
estimate that the Executive branch annually awards 54,000 
construction contracts exceeding $25,000, of which half (27,000 
contracts) are awarded to approximately 7,500 small business firms. 
We estimate that approximately 60,000 small business subcontractors 
could benefit from increased payment protection.

    The FAR Secretariat has submitted a copy of the IRFA to the Chief 
Counsel for Advocacy of the Small Business Administration. A copy of 
the IRFA may be obtained from the FAR Secretariat. The Councils will 
consider comments from small entities concerning the affected FAR 
subparts 28 and 52 in accordance with 5 U.S.C. 610. Comments must be 
submitted separately and should cite 5 U.S.C 601, et seq. (FAR case 
1999-302), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FAR do not impose information collection requirements that require 
the approval of the Office of Management and Budget under 44 U.S.C. 
3501, et seq.

List of Subjects in 48 CFR Parts 28 and 52

    Government procurement.

    Dated: December 17, 1999.
Edward C. Loeb,
Director, Federal Acquisition Policy Division.

    Therefore, DoD, GSA, and NASA propose that 48 CFR parts 28 and 52 
be amended as set forth below:
    1. The authority citation for 48 CFR parts 28 and 52 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. Revise section 28.102-2 to read as follows:


28.102-2  Amount required.

    (a) Definition. As used in this subsection--
    Original contract price means the award price of the contract; or, 
for requirements contracts, the price payable for the estimated 
quantity; or, for indefinite-quantity contracts, the price payable for 
the specified minimum quantity. Original contract

[[Page 72829]]

price does not include the price of any options, except those options 
exercised at the time of contract award.
    (b) Contracts exceeding $100,000 (Miller Act).
    (1) Performance bonds. Unless the contracting officer determines 
that a lesser amount is adequate for the protection of the Government, 
the penal amount of performance bonds must equal--
    (i) 100 percent of the original contract price; and
    (ii) If the contract price increases, an additional amount equal to 
100 percent of any such increase.
    (2) Payment bonds--
    (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, an additional amount equal to 
100 percent of any such increase.
    (ii) The amount of the payment bond must be no less than the amount 
of the performance bond.
    (c) Contracts exceeding $25,000 but not exceeding $100,000. 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 any such 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).
    3. Revise the section heading and paragraph (a) of section 28.102-
3; and add a sentence at the end of paragraph (b) to read as follows:


28.102-3  Contract clauses.

    (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 
$100,000. The contracting officer may decrease the penal amount of the 
performance or payment bonds 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) * * * The contracting officer may decrease the required 
percentage in paragraph (b) of the clause in accordance with 28.102-
2(c).

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


52.228-13  [Amended]

    4. Amend section 52.228-13 by revising the date of the clause; and 
in paragraph (b) of the clause by removing ``50'' and adding ``100'' in 
its place.
    5. In section 52.228-15, revise the date of the clause, paragraph 
(a), and paragraph (b); and add paragraph (e) to read as follows:


52.228-15  Performance and Payment Bonds-- Construction.

* * * * *

Performance and Payment Bonds--Construction (Date)

    (a) Definitions. As used in this clause--
    Original contract price means the award price of the contract; 
or, for requirements contracts, the price payable for the estimated 
quantity; or, for indefinite-quantity contracts, the price payable 
for the specified minimum quantity. Original contract price does not 
include the price of any options, except those options exercised at 
the time of contract award.
    (b) Unless the resulting contract price is $100,000 or less, the 
successful offeror shall furnish performance and payment bonds to 
the Contracting Officer as follows:
    (1) Performance bonds (Standard Form 25): The penal amount of 
performance bonds at the time of contract award shall be 100 percent 
of the original contract price.
    (2) Payment Bonds (Standard Form 25-A): The penal amount of 
payment bonds at the time of contract award shall be 100 percent of 
the original contract price.
    (3) Additional bond protection. (i) The Government may require 
additional performance and payment bond protection if the contract 
price is increased. The increase in protection generally will equal 
100 percent of the increase in contract price.
    (ii) The Government may secure the additional protection by 
directing the Contractor to increase the penal amount of the 
existing bond or to obtain an additional bond.
* * * * *
    (e) Any subcontractor waiver of the right to sue on a payment 
bond is subject to 40 U.S.C. 270b(c).

(End of clause)

    6. In section 52.228-16, revise the date of the clause and 
paragraph (a); in paragraph (b) add ``original'' before ``contract'', 
twice; and revise paragraph (d) and Alternate I to read as follows:


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

* * * * *

Performance and Payment--Bonds Other Than Construction (Date)

    (a) Definitions. As used in this clause--
    Original contract price means the award price of the contract 
or, for requirements contracts, the price payable for the estimated 
quantity; or, for indefinite-quantity contracts, the price payable 
for the specified minimum quantity. Original contract price does not 
include the price of any options, except those options exercised at 
the time of contract award.
* * * * *
    (d) The Government may require additional performance and 
payment bond protection if the contract price is increased. The 
Government may secure the additional protection by directing the 
Contractor to increase the penal amount of the existing bonds or to 
obtain additional bonds.
* * * * *
(End of clause)

    Alternate I (Date). As prescribed in 28.103-4, substitute the 
following paragraphs (b) and (d) for paragraphs (b) and (d) of the 
basic clause:
    (b) The Contractor shall furnish a performance bond (Standard 
Form 1418) for the protection to the Government in an amount equal 
to ____ percent of the contract price.
    (d) The Government may require additional performance bond 
protection if the contract price is increased. The Government may 
secure the additional protection by directing the Contractor to 
increase the penal amount of the existing bond or to obtain an 
additional bond.

[FR Doc. 99-33280 Filed 12-27-99; 8:45 am]
BILLING CODE 6820-EP-P