28.102-2 Amount required
Source: FAR 28.102-2 on acquisition.gov
Contractors must provide performance and payment bonds or alternative protections equal to 100% of the contract price for construction contracts above $35,000, with adjustments required for any contract price increases.
Overview
FAR 28.102-2 specifies the required amounts for performance and payment bonds, as well as alternative payment protections, in construction contracts. The section defines how to calculate the "original contract price" and sets clear thresholds and formulas for determining the minimum bond amounts based on contract value. It also outlines procedures for increasing bond amounts if the contract price increases and allows for reductions in bond amounts under certain conditions.
Key Rules
- Definition of Original Contract Price
- The original contract price is the award price, excluding options unless exercised at award, and is calculated differently for requirements and indefinite-quantity contracts.
- Contracts Exceeding $150,000
- Performance and payment bonds must each be at least 100% of the original contract price, with increases required if the contract price rises. Payment bonds cannot be less than performance bonds.
- Contracts Between $35,000 and $150,000
- Payment bonds or alternative payment protections must be at least 100% of the original contract price, with increases for contract price adjustments.
- Securing Additional Protection
- If the contract price increases, the contractor must provide additional security through increased bond sums, new bonds, or alternative protections.
- Reducing Bond Amounts
- The contracting officer may reduce bond amounts under specific regulatory conditions.
Responsibilities
- Contracting Officers: Determine and document appropriate bond amounts, direct contractors to provide additional or reduced security as needed, and ensure compliance with thresholds.
- Contractors: Provide required bonds or alternative protections in the specified amounts and adjust them as contract prices change.
- Agencies: Oversee compliance and maintain documentation for determinations and bond adjustments.
Practical Implications
This section ensures the government is adequately protected against contractor default and non-payment to subcontractors. Contractors must be vigilant in maintaining proper bond coverage, especially when contract modifications occur. Failure to comply can result in contract delays or termination.
(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 total 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) Contracts exceeding $150,000-
(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 the 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 the increase.
(ii) The amount of the payment bond must be no less than the amount of the performance bond.
(c) Contracts exceeding $35,000 but not exceeding $150,000. 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 the 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 28.203-3(c) or 28.204(b).