28.201
Requirements for security
Agencies must accept all permitted forms of security for contract bonds and cannot restrict offerors' choices unless required by law or regulation.
Overview
FAR 28.201 outlines the requirements for obtaining adequate security for bonds associated with contracts for supplies or services, including construction. It specifies acceptable forms of security, such as corporate or individual sureties, and other types of security authorized under FAR 28.204. The section also mandates that solicitations must allow offerors to use any permitted type of surety or security unless specifically prohibited by law or regulation. This ensures flexibility and fairness in the bonding process, while maintaining the government's need for adequate protection against default or non-performance.
Key Rules
- Adequate Security for Bonds
- Agencies must ensure that all bonds required or used in contracts are backed by sufficient security, including coinsurance and reinsurance agreements.
- Acceptable Forms of Security
- Security can be provided by corporate or individual sureties, or by other forms authorized in FAR 28.204 (such as U.S. bonds, cash, or irrevocable letters of credit).
- Solicitation Requirements
- Solicitations cannot restrict offerors from using any type of surety or security allowed by this subpart, unless a specific law or regulation prohibits it.
Responsibilities
- Contracting Officers: Must verify that bonds are supported by adequate and acceptable security, and ensure solicitations do not improperly limit security options.
- Contractors: Must provide security for bonds in an acceptable form as specified in the solicitation and FAR regulations.
- Agencies: Responsible for oversight to ensure compliance with security requirements for bonds.
Practical Implications
- This section exists to protect the government’s interests by ensuring bonds are properly secured, reducing risk of loss from contractor default.
- Contractors benefit from flexibility in choosing among various forms of security, which can improve competition and access to government contracts.
- Common pitfalls include failing to accept all permissible forms of security or improperly restricting offerors’ options in solicitations.