28.203-1 Acceptability of individual sureties
Source: FAR 28.203-1 on acquisition.gov
Individual sureties must pledge Treasury-approved, unencumbered assets equal to or exceeding the bond amount, and contracting officers must verify asset eligibility and value with Treasury before acceptance.
Overview
FAR 28.203-1 outlines the requirements for the acceptability of individual sureties on government bonds, excluding position schedule bonds. Individual sureties must pledge assets that meet the eligibility requirements set by the Treasury's Bureau of the Fiscal Service, and the value of these assets must at least equal the penal amount of the bond. The regulation details the process for executing bonds, calculating asset value, submitting required forms, and the roles of both contractors and contracting officers in verifying and approving individual sureties. It also provides procedures for handling unacceptable sureties and reporting suspected fraud.
Key Rules
- Eligible Assets
- Individual sureties must pledge assets listed as acceptable collateral by the Treasury, and these assets must be unencumbered and properly valued.
- Bond Execution and Forms
- Bonds must be executed using standard forms (e.g., SF 24, SF 25, SF 25A), and the individual surety must complete SF 28, Affidavit of Individual Surety.
- Asset Valuation
- The net adjusted value of pledged assets (market value minus margin) must meet or exceed the bond's penal amount; margin tables are available online.
- Multiple Sureties
- Up to three individual sureties may be used per bond, with combined assets meeting the required value; all are jointly and severally liable.
- Contracting Officer Review
- Contracting officers must verify asset eligibility and value with Treasury and notify all parties of the determination.
- Handling Unacceptable Sureties
- If a surety is unacceptable, the offeror may be rejected as nonresponsible, or allowed to substitute another surety within a reasonable time.
- Fraud Reporting
- Suspected criminal or fraudulent activity must be reported according to agency procedures.
Responsibilities
- Contracting Officers: Must verify asset eligibility and value with Treasury, determine acceptability, notify parties, and report fraud.
- Contractors: Must ensure individual sureties meet asset and documentation requirements, and substitute sureties if necessary.
- Agencies: Oversee compliance, handle fraud referrals, and maintain procedures for review and reporting.
Practical Implications
- Ensures only financially sound individual sureties are accepted, protecting government interests.
- Requires careful documentation and timely communication between contractors, sureties, and contracting officers.
- Common pitfalls include submitting ineligible assets, incomplete forms, or failing to respond to Treasury assessments promptly.
(a)An individual surety is acceptable for all types of bonds except position schedule bonds. Assets pledged by an individual surety shall meet the eligibility requirements of Treasury's Bureau of the Fiscal Service. Per http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title31-section9310&num=0&edition=prelim" target="_blank">31 U.S.C. 9310, individual sureties must pledge eligible obligations, which Treasury refers to as acceptable collateral or eligible collateral. A list of acceptable assets, entitled “Acceptable Collateral for 31 CFR part 225,” may be accessed by going to https://www.treasurydirect.gov/files/laws-and-regulations/collateral-programs/2018-final-225-list-of-acceptable-collateral.pdf" target="_blank">https://www.treasurydirect.gov/files/laws-and-regulations/collateral-programs/2018-final-225-list-of-acceptable-collateral.pdf and clicking on “Acceptable Collateral for 31 CFR part 225”.
(b)
(1)An individual surety shall execute the bond (e.g., bid bond (https://www.gsa.gov/forms-library/bid-bond" target="_blank">SF 24), performance bond (https://www.gsa.gov/forms-library/performance-bond" target="_blank">SF 25), payment bond (https://www.gsa.gov/forms-library/payment-bond" target="_blank">SF 25A)).
(2)The net adjusted value of unencumbered assets is their market value minus the margin. The margin tables are available at www.treasurydirect.gov. The net adjusted value of unencumbered assets pledged by the individual surety must equal or exceed the penal amount (i.e., face value) of each bond.
(3)The individual surety shall execute the https://www.gsa.gov/forms-library/affidavit-individual-surety" target="_blank">SF 28, Affidavit of Individual Surety, and provide a security interest. One individual surety is adequate support for a bond, provided the net adjusted value of unencumbered assets pledged by that individual surety equals or exceeds the amount of the bond.
(4)An offeror or contractor may submit up to three individual sureties for each bond, in which case the net adjusted value of the pledged unencumbered assets, when combined, must equal or exceed the penal amount of the bond. Each individual surety is jointly and severally liable to the extent of the penal amount of the bond.
(c)Using the information from the https://www.gsa.gov/forms-library/affidavit-individual-surety" target="_blank">SF 28 submitted by the offeror or contractor, the contracting officer shall notify the Treasury's collateral operations support team by email at BMT@fiscal.treasury.gov or by phone at 888-568-7343, of the individual surety, the assets to be pledged, and the amount necessary to cover the individual surety bond, i.e., the required amount to be collateralized. Treasury will advise the contracting officer whether the assets are eligible to be pledged, consistent with 28.203-1(a), and of the valuation of the assets offered to be pledged, consistent with the valuation standards in 28.203-1(b)(2). If after 3 business days the contracting officer has not received a response from Treasury, the contracting officer may seek assistance from the Director, Bank Policy and Oversight, at 202-504-3502. The contracting officer shall determine whether the individual surety bond is acceptable as to the amount necessary to cover the individual surety bond based on the asset eligibility and valuation assessment from Treasury. The contracting officer shall notify both the offeror or contractor and the individual surety of this determination.
(d)If the contracting officer determines the individual surety is acceptable, the contracting officer shall request the Treasury's collateral operations support team set up the necessary individual surety pledged asset collateral account.
(e)If the contracting officer determines that no individual surety in support of a bid guarantee is acceptable, the offeror utilizing the individual surety shall be rejected as nonresponsible, except as provided in 28.101-4. A finding of nonresponsibility based on unacceptability of an individual surety, need not be referred to the Small Business Administration for a Certificate of Competency. (See 19.602-1(a) and 61 Comp. Gen. 456 (1982).)
(f)If a contractor submits an unacceptable individual surety, or one that Treasury could not assess the asset eligibility and valuation within a reasonable time, then the contracting officer may permit the contractor to substitute an acceptable surety within a reasonable time.
(g)Evidence of possible criminal or fraudulent activities by an individual surety shall be referred to the appropriate agency official in accordance with agency procedures.