28.204-1 United States bonds or notes
Source: FAR 28.204-1 on acquisition.gov
Contractors may use U.S. bonds or notes as an alternative to surety bonds, but must provide proper documentation and follow strict deposit procedures.
Overview
FAR 28.204-1 provides an alternative to furnishing a surety or sureties on a bond required by the Government. Instead, a contractor may deposit United States bonds or notes equal at par value to the penal sum of the bond. This option is authorized by 31 U.S.C. 9303 and Treasury Department Circular No. 154 (31 CFR Part 225). The deposit must be accompanied by a duly executed power of attorney and an agreement authorizing the Government to collect or sell the securities if the contractor defaults. The contracting officer is responsible for handling the deposited securities, either by turning them over to an authorized agency official or depositing them with the Treasurer of the United States, a Federal Reserve Bank, or another designated depository. Special procedures apply for deposits received in the District of Columbia, which must be deposited with the Treasurer of the United States.
Key Rules
- Alternative to Surety Bonds
- Contractors may deposit U.S. bonds or notes instead of providing a surety on required bonds.
- Deposit Requirements
- The value of the bonds or notes must equal the penal sum of the bond at par value.
- Accompanying Documentation
- A power of attorney and agreement for collection or sale in case of default must accompany the deposit.
- Handling of Securities
- Contracting officers must follow agency and Treasury procedures for depositing or turning over securities, with specific rules for deposits in the District of Columbia.
Responsibilities
- Contracting Officers: Ensure proper receipt, documentation, and deposit of U.S. bonds or notes; follow agency and Treasury procedures; deposit D.C. securities with the Treasurer of the United States.
- Contractors: Provide U.S. bonds or notes equal to the penal sum, with required documentation; authorize collection or sale in case of default.
- Agencies: Prescribe procedures for handling and depositing securities; ensure compliance with Treasury regulations.
Practical Implications
- This section offers contractors a secure, government-backed alternative to surety bonds, which may be beneficial for those unable or unwilling to secure a surety. Proper documentation and adherence to deposit procedures are critical to avoid delays or noncompliance. Common pitfalls include failing to provide the correct value of securities or missing required documentation.
Any person required to furnish a bond to the Government has the option, instead of furnishing a surety or sureties on the bond, of depositing certain United States bonds or notes in an amount equal at their par value to the penal sum of the bond (the Act of February 24,1919 (http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title31-section9303&num=0&edition=prelim" target="_blank">31 U.S.C. 9303) and Treasury Department Circular No.154 (31 CFR Part 225)). In addition, a duly executed power of attorney and agreement authorizing the collection or sale of such United States bonds or notes in the event of default of the principal on the bond shall accompany the deposited bonds or notes. The contracting officer may-
(a) Turn securities over to the finance or other authorized agency official; or
(b) Deposit them with the Treasurer of the United States, a Federal Reserve Bank (or branch with requisite facilities), or other depository designated for that purpose by the Secretary of the Treasury, under procedures prescribed by the agency concerned and Treasury Department CircularNo.154 (exception: The contracting officer shall deposit all bonds and notes received in the District of Columbia with the Treasurer of the United States).