28.203-3
Release of security interest
Security interests on individual surety assets can only be released after all contractual and legal obligations are satisfied, following strict procedures and documentation requirements.
Overview
FAR 28.203-3 outlines the procedures and conditions under which a contracting officer may release the security interest on assets pledged by an individual surety. The regulation ensures that the government’s interests are protected until all contractual and legal obligations are satisfied. The release process requires legal counsel consultation and the use of Optional Form 91 or a similar release document. The timing and conditions for release vary depending on the type of contract and the nature of the bond or guarantee involved.
Key Rules
- Release Timing for Bonds Statute Contracts
- Security interest must be maintained for the later of 1 year after final payment, completion of any warranty period (for performance bonds), or resolution of all claims filed within 1 year after final payment.
- Release Timing for Alternative Payment Protection Contracts
- Security interest must be maintained for the full contract performance period plus 1 year.
- Release Timing for Other Contracts
- Security interest must be maintained for 90 days after final payment or until completion of any warranty period (for performance bonds), whichever is later.
- Release for Bid Guarantees
- Upon written request and evidence that the offer will not result in contract award, the security interest may be released.
- Partial Release Based on Substantial Performance
- Contracting officers may partially release security interest if substantial performance is demonstrated, provided the remaining security covers outstanding obligations. The surety must provide an affidavit agreeing that the release does not relieve its bond obligations.
Responsibilities
- Contracting Officers: Must consult legal counsel, use appropriate forms, and ensure all conditions are met before releasing security interests.
- Contractors: Must ensure all claims and obligations are resolved before requesting release; provide necessary documentation for partial releases.
- Agencies: Oversee compliance and ensure proper documentation and legal review.
Practical Implications
- This section protects the government and subcontractors by ensuring security interests are not released prematurely.
- Contractors and sureties must be diligent in tracking claims, warranty periods, and performance milestones.
- Failure to comply can delay release of assets or expose parties to liability.