52.228-16
Performance and Payment Bonds-Other Than Construction
FAR 52.228-16 requires contractors on non-construction contracts to provide timely performance and payment bonds (or just a performance bond under Alternate I) to protect the Government and ensure payment to suppliers and subcontractors.
Overview
FAR 52.228-16 establishes requirements for performance and payment bonds on non-construction contracts, ensuring the Government is protected against contractor default and that subcontractors and suppliers are paid. This clause specifies the forms, timing, and acceptable types of security for bonds, and allows for adjustments if the contract price increases. Alternate I modifies the requirements to only mandate a performance bond, not a payment bond.
Key Rules
- Bond Requirements
- Contractors must provide a performance bond (SF 1418) and a payment bond (SF 1416) in specified percentages of the original contract price, unless Alternate I applies (performance bond only).
- Submission Timeline
- All executed bonds and necessary reinsurance agreements must be submitted to the Contracting Officer within a specified number of days and before work begins.
- Additional Bond Protection
- If the contract price increases, the Government may require additional bond protection by increasing the penal amount or obtaining new bonds.
- Acceptable Security
- Bonds must be supported by approved corporate sureties, individual sureties, or other acceptable forms of security as listed in Treasury Department Circular 570.
Responsibilities
- Contracting Officers: Must specify bond percentages, deadlines, and ensure bonds meet regulatory standards.
- Contractors: Must obtain, execute, and submit required bonds and any reinsurance agreements before starting work, and provide additional bonds if required.
- Agencies: Oversee compliance, verify surety acceptability, and enforce bond requirements.
Practical Implications
- This clause protects the Government and subcontractors from financial risk in non-construction contracts. Contractors must be diligent in securing and submitting proper bonds on time, using approved sureties or securities. Delays or non-compliance can result in contract delays or termination. Alternate I reduces the burden by requiring only a performance bond in certain cases.