28.001 Definitions
Source: FAR 28.001 on acquisition.gov
FAR 28.001 matters because it defines the bonding and surety terms that determine what security contractors must provide and how the Government protects itself from bid withdrawal, nonperformance, and nonpayment.
Overview
- FAR 28.001 provides the foundational definitions used throughout Part 28 - Bonds and Insurance. It explains the core bonding and surety terms that govern how agencies and contractors understand bid security, contract bonds, and related surety relationships.
- Its purpose is to create a common vocabulary for applying bonding requirements in solicitations and contracts, especially where the Government needs financial assurance that a bidder or contractor will meet its obligations.
Key Rules
- Bid and Bidder
- A bid includes any response to a solicitation, including proposals in negotiated acquisitions, and a bidder includes any entity that submits or has submitted such a response.
- Bid Guarantee and Bond Types
- A bid guarantee assures the bidder will keep its bid open for acceptance and, if selected, execute the contract and furnish required bonds. The section also defines major bond types, including advance payment, annual bid, annual performance, patent infringement, payment, and performance bonds.
- Surety-Related Terms
- The section defines attorney-in-fact, consent of surety, penal sum, and reinsurance, clarifying who may bind a surety, when surety acknowledgment is needed after contract modification, and the maximum amount of surety liability.
Responsibilities
- Contracting Officers: apply these definitions consistently when drafting solicitations, evaluating bid security, and administering bond requirements.
- Contractors: understand which bond instruments may be required and ensure sureties, powers of attorney, and bond amounts are valid and sufficient.
- Agencies: use these definitions as the baseline for Part 28 bonding and insurance compliance.
Practical Implications
- This section exists to prevent misunderstandings in bonding and surety arrangements.
- It affects daily contracting by defining the legal and financial instruments that protect the Government against nonperformance, withdrawal of bids, and nonpayment of labor or material suppliers.
- Common pitfalls include confusing bond types, overlooking surety consent after modifications, and misunderstanding the penal sum as the cap on surety liability.
As used in this part-
Attorney-in-fact means an agent, independent agent, underwriter, or any other company or individual holding a power of attorney granted by a surety (see also "power of attorney" at 2.101).
Bid means any response to a solicitation, including a proposal under a negotiated acquisition. See the definition of "offer" at 2.101.
Bid guarantee means a form of security assuring that the bidder-
(1) Will not withdraw a bid within the period specified for acceptance; and
(2) Will execute a written contract and furnish required bonds, including any necessary coinsurance or reinsurance agreements, within the time specified in the bid, unless a longer time allowed, after receipt of the specified forms.
Bidder means any entity that is responding or has responded to a solicitation, including an offeror under a negotiated acquisition.
Bond means a written instrument executed by a bidder or contractor (the "principal"), and a second party (the "surety" or "sureties") (except as provided in 28.204), to assure fulfillment of the principal’s obligations to a third party (the "obligee" or "Government"), identified in the bond. If the principal’s obligations are not met, the bond assures payment, to the extent stipulated, of any loss sustained by the obligee. The types of bonds and related documents are as follows:
(1) An advance payment bond secures fulfillment of the contractor’s obligations under an advance payment provision.
(2) An annual bid bond is a single bond furnished by a bidder, in lieu of separate bonds, which secure all bids (on other than construction contracts) requiring bonds submitted during a specific Government fiscal year.
(3) An annual performance bond is a single bond furnished by a contractor, in lieu of separate performance bonds, to secure fulfillment of the contractor’s obligations under contracts (other than construction contracts) requiring bonds entered into during a specific Government fiscal year.
(4) A patent infringement bond secures fulfillment of the contractor’s obligations under a patent provision.
(5) A payment bond assures payments as required by law to all persons supplying labor or material in the prosecution of the work provided for in the contract.
(6) A performance bond secures performance and fulfillment of the contractor’s obligations under the contract.
Consent of surety means an acknowledgment by a surety that its bond given in connection with a contract continues to apply to the contract as modified.
Penal sum or "penal amount" means the amount of money specified in a bond (or a percentage of the bid price in a bid bond) as the maximum payment for which the surety is obligated or the amount of security required to be pledged to the Government in lieu of a corporate or individual surety for the bond.
Reinsurance means a transaction which provides that a surety, for a consideration, agrees to indemnify another surety against loss which the latter may sustain under a bond which it has issued.