52.228-15 Performance and Payment Bonds-Construction
Source: FAR 52.228-15 on acquisition.gov
FAR 52.228-15 mandates that construction contractors provide performance and payment bonds equal to 100% of the contract price, ensuring project completion and payment protection for subcontractors and suppliers.
Overview
FAR 52.228-15 requires contractors awarded construction contracts above a certain threshold to provide both performance and payment bonds. These bonds protect the government and subcontractors by ensuring contract completion and payment for labor and materials. The clause details the required bond amounts, acceptable forms of security, procedures for furnishing bonds, and rules regarding waivers of payment bond rights.
Key Rules
- Bond Amounts
- Contractors must provide performance and payment bonds each equal to 100% of the original contract price for construction contracts above the FAR 28.102-1(a) threshold.
- Additional Bond Protection
- If the contract price increases, the government may require additional bond protection equal to 100% of the increase.
- Furnishing Bonds
- Executed bonds must be submitted to the Contracting Officer before work begins, within the timeframe specified in the solicitation or by the Contracting Officer.
- Acceptable Sureties and Security
- Bonds must be backed by approved corporate sureties (listed in Treasury Circular 570), individual sureties, or other acceptable forms of security.
- Waiver of Payment Bond Rights
- Any waiver of the right to sue on the payment bond by subcontractors or suppliers must be in writing, signed, and executed after furnishing labor or materials.
Responsibilities
- Contracting Officers: Ensure bonds are received and meet requirements before work starts; may require additional bonds if contract price increases.
- Contractors: Obtain and submit required bonds and any additional protection as directed; ensure sureties are approved; comply with waiver rules.
- Agencies: Oversee compliance and maintain records of bonds and sureties.
Practical Implications
This clause protects the government and subcontractors from contractor default or nonpayment. Contractors must plan for bonding costs and administrative requirements. Failure to provide proper bonds can delay contract performance or result in termination. Common issues include late submission, unapproved sureties, or insufficient bond amounts.
As prescribed in 28.102-3(a), insert a clause substantially as follows:
Performance and Payment Bonds-Construction (Jun 2020)
(a) Definitions. As used in this clause-
Original contract price means the award price of the contract; or, for requirements contracts, the price payable for the estimated total quantity; or, for indefinite-quantity contracts, the price payable for the specified minimum quantity. Original contract price does not include the price of any options, except those options exercised at the time of contract award.
(b) Amount of required bonds. Unless the resulting contract price is valued at or below the threshold specified in Federal Acquisition Regulation 28.102-1(a) on the date of award of this contract, the successful offeror shall furnish performance and payment bonds to the Contracting Officer as follows:
(1) Performance bonds (https://www.gsa.gov/forms-library/performance-bond" target="_blank">Standard Form 25). The penal amount of performance bonds at the time of contract award shall be 100 percent of the original contract price.
(2) Payment Bonds (https://www.gsa.gov/forms-library/payment-bond" target="_blank">Standard Form 25A). The penal amount of payment bonds at the time of contract award shall be 100 percent of the original contract price.
(3) Additional bond protection.
(i) The Government may require additional performance and payment bond protection if the contract price is increased. The increase in protection generally will equal 100 percent of the increase in contract price.
(ii) The Government may secure the additional protection by directing the Contractor to increase the penal amount of the existing bond or to obtain an additional bond.
(c) Furnishing executed bonds. The Contractor shall furnish all executed bonds, including any necessary reinsurance agreements, to the Contracting Officer, within the time period specified in the Bid Guarantee provision of the solicitation, or otherwise specified by the Contracting Officer, but in any event, before starting work.
(d) Surety or other security for bonds. The bonds shall be in the form of firm commitment, supported by corporate sureties whose names appear on the list contained in Treasury Department Circular 570, individual sureties, or by other acceptable security such as postal money order, certified check, cashier's check, irrevocable letter of credit, or, in accordance with Treasury Department regulations, certain bonds or notes of the United States. Treasury Circular 570 is published in the Federal Register or may be obtained from the:
U.S. Department of the Treasury,
Financial Management,
Service Surety Bond Branch,
3700 East West Highway,
Room 6 F01,
Hyattsville, MD 20782.
Or via the internet at http://www.fms.treas.gov/c570/" target="_blank">http://www.fms.treas.gov/c570/.
(e) Notice of subcontractor waiver of protection (40 U.S.C. 3133(c)). Any waiver of the right to sue on the payment bond is void unless it is in writing, signed by the person whose right is waived, and executed after such person has first furnished labor or material for use in the performance of the contract.
(End of clause)