28.102
Performance and payment bonds and alternative payment protections for construction contracts
FAR 28.102 mandates performance and payment bonds or approved alternatives for construction contracts to protect the government and subcontractors, with specific requirements based on contract value.
Overview
FAR 28.102 establishes the requirements for performance and payment bonds, as well as alternative payment protections, specifically for construction contracts. The section outlines when such bonds are required, the minimum and maximum amounts, and the appropriate contract clauses to include. These requirements are designed to protect the government’s interests by ensuring contractors fulfill their obligations and that subcontractors and suppliers are paid. The section also provides alternatives to traditional bonds for certain contracts, particularly those below specific dollar thresholds, to facilitate broader participation and reduce barriers for small businesses.
Key Rules
- Performance and Payment Bonds Requirement
- Construction contracts above a certain threshold must include performance and payment bonds to guarantee contract completion and payment to subcontractors and suppliers.
- Alternative Payment Protections
- For construction contracts below the threshold, alternative payment protections (such as escrow accounts or irrevocable letters of credit) may be used instead of traditional bonds.
- Bond Amounts
- The regulation specifies minimum and maximum bond amounts based on contract value, ensuring adequate protection without excessive burden.
- Contract Clauses
- Contracting officers must include the appropriate FAR clauses in solicitations and contracts to enforce these requirements.
Responsibilities
- Contracting Officers: Must determine the need for bonds or alternative protections, set appropriate amounts, and include required clauses.
- Contractors: Must obtain and submit required bonds or alternative protections as specified in the contract.
- Agencies: Oversee compliance and ensure protections are in place before work begins.
Practical Implications
- Ensures financial security for the government and subcontractors on construction projects.
- Impacts contractor eligibility and administrative workload, especially for small businesses.
- Failure to comply can result in contract delays, terminations, or inability to receive payment.