28.203-1
Acceptability of individual sureties
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.