28.204-4
Contract clause
FAR 28.204-4 mandates the inclusion of the Irrevocable Letter of Credit clause in contracts requiring bid guarantees or bonds, allowing contractors to use letters of credit as security.
Overview
FAR 28.204-4 requires contracting officers to include the clause at 52.228-14, Irrevocable Letter of Credit, in solicitations and contracts for services, supplies, or construction whenever a bid guarantee, performance bond, or performance and payment bond is required. This ensures that an irrevocable letter of credit can be accepted as an alternative to traditional sureties, providing flexibility for contractors in meeting bonding requirements.
Key Rules
- Clause Inclusion
- The Irrevocable Letter of Credit clause (52.228-14) must be inserted in relevant solicitations and contracts.
- Applicability
- Applies when bid guarantees, performance bonds, or performance and payment bonds are required for services, supplies, or construction contracts.
Responsibilities
- Contracting Officers: Must ensure the correct clause is included in applicable solicitations and contracts.
- Contractors: Should be aware that an irrevocable letter of credit is an acceptable alternative to traditional sureties when the clause is present.
- Agencies: Must oversee compliance with clause inclusion and bonding alternatives.
Practical Implications
- This section provides contractors with an alternative to corporate or individual sureties, potentially making it easier to meet bonding requirements.
- Failure to include the clause could limit contractor options and result in non-compliance with FAR requirements.
- Contractors should review solicitations to confirm the presence of this clause if they intend to use an irrevocable letter of credit.