Amount required
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.