Subpart 28.2
Sureties and Other Security for Bonds
FAR Subpart 28.2 ensures that contractors provide reliable financial security for bonds, protecting government interests and specifying strict standards for acceptable sureties and alternatives.
Overview
FAR Subpart 28.2 establishes the requirements and standards for sureties and other forms of security used to support bonds in federal government contracts. It covers the types of acceptable sureties (corporate and individual), the criteria for their acceptability, and alternative forms of security that may be used in lieu of sureties. The subpart ensures that contractors provide adequate financial assurance to the government, protecting federal interests in the event of contractor default. It also outlines the documentation and approval processes for each type of security, ensuring compliance and risk mitigation in government contracting.
Key Rules
- Requirements for Security
- Contractors must provide security for bonds as required by the contract, and the security must meet specific regulatory standards.
- Acceptability of Corporate Sureties
- Only corporate sureties listed as acceptable by the U.S. Treasury may be used for federal bonds.
- Individual Sureties
- Individual sureties are permitted but must meet strict financial and documentation requirements.
- Alternatives to Sureties
- Alternatives such as cash, U.S. government securities, or irrevocable letters of credit may be accepted in lieu of sureties, subject to agency approval.
Responsibilities
- Contracting Officers: Must verify the acceptability and sufficiency of sureties or alternative securities, and ensure all documentation is complete and compliant.
- Contractors: Must provide required bonds and ensure their sureties or alternative securities meet FAR standards.
- Agencies: Oversee compliance, maintain records, and may approve alternative forms of security.
Practical Implications
- This subpart protects the government from financial loss due to contractor non-performance or default.
- Contractors must carefully select and document their sureties or alternative securities to avoid delays or rejection.
- Common pitfalls include using unapproved sureties, incomplete documentation, or misunderstanding acceptable alternatives.