28.102-1 General
Source: FAR 28.102-1 on acquisition.gov
Federal construction contracts require specific bonds or payment protections based on contract value, and contractors must submit these before starting work.
Overview
FAR 28.102-1 outlines the general requirements for performance and payment bonds, as well as alternative payment protections, for federal construction contracts. It implements the Miller Act (40 U.S.C. chapter 31, subchapter III) and establishes thresholds and options for bonding and payment protections based on contract value. For contracts exceeding $150,000, performance and payment bonds are mandatory unless waived by the contracting officer for foreign work or as otherwise authorized by law. For contracts between $35,000 and $150,000, the contracting officer must select two or more payment protection alternatives, such as payment bonds, irrevocable letters of credit, escrow agreements, certificates of deposit, or other approved securities. Contractors must provide the required bonds or payment protections before starting work or receiving a notice to proceed.
Key Rules
- Performance and Payment Bonds for Large Contracts
- Required for construction contracts over $150,000, with limited waiver options for foreign work or as authorized by law.
- Alternative Payment Protections for Mid-Size Contracts
- For contracts between $35,000 and $150,000, the contracting officer selects two or more payment protection methods, and the contractor must provide one of them.
- Submission Timing
- All required bonds or payment protections must be furnished before work begins or a notice to proceed is issued.
Responsibilities
- Contracting Officers: Determine and communicate required bonds or payment protections, select alternatives for mid-size contracts, and ensure compliance before work starts.
- Contractors: Obtain and submit the required bonds or payment protections, including any necessary reinsurance agreements, before commencing work.
- Agencies: Oversee compliance with bonding and payment protection requirements and maintain documentation.
Practical Implications
- Ensures financial protection for the government and subcontractors on construction projects.
- Contractors must plan for bonding or alternative protections early to avoid delays.
- Failure to provide required protections can result in delayed start or contract termination.
(a) http://uscode.house.gov/view.xhtml?req=granuleid%3AUSC-prelim-title40-chapter31&saved=%7CZ3JhbnVsZWlkOlVTQy1wcmVsaW0tdGl0bGU0MC1jaGFwdGVyMzctZnJvbnQ%3D%7C%7C%7C0%7Cfalse%7Cprelim&edition=prelim" target="_blank">40 U.S.C. chapter 31, subchapter III, Bonds (formerly known as the Miller Act), requires performance and payment bonds for any construction contract exceeding $150,000, except that this requirement may be waived-
(1) By the contracting officer for as much of the work as is to be performed in a foreign country upon finding that it is impracticable for the contractor to furnish such bond; or
(2) As otherwise authorized by the Bonds statute or other law.
(b)
(1) Pursuant to http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title40-section3132&num=0&edition=prelim" target="_blank">40 U.S.C. 3132, for construction contracts greater than $35,000, but not greater than $150,000, the contracting officer shall select two or more of the following payment protections, giving particular consideration to inclusion of an irrevocable letter of credit as one of the selected alternatives:
(i) A payment bond.
(ii) An irrevocable letter of credit (ILC).
(iii) 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.
(iv) Certificates of deposit. The contractor deposits certificates of deposit from a federally insured financial institution with the contracting officer, in an acceptable form, executable by the contracting officer.
(v) A deposit of the types of security listed in 28.204-1 and 28.204-2.
(2) The contractor shall submit to the Government one of the payment protections selected by the contracting officer.
(c) The contractor shall furnish all bonds or alternative payment protection, including any necessary reinsurance agreements, before receiving a notice to proceed with the work or being allowed to start work.