52.228-16 Performance and Payment Bonds-Other Than Construction
Source: FAR 52.228-16 on acquisition.gov
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.
As prescribed in 28.103-4 , insert a clause substantially as follows:
Performance and Payment Bonds-Other Than Construction (Nov 2006)
(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 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) The Contractor shall furnish a performance bond (https://www.gsa.gov/forms-library/performance-bond-other-construction-contracts" target="_blank">Standard Form 1418) for the protection of the Government in an amount equal to _______ percent of the original contract price and a payment bond https://www.gsa.gov/forms-library/payment-bond-other-construction-contracts" target="_blank">Standard Form 1416) in an amount equal to ______ percent of the original contract price.
(c) The Contractor shall furnish all executed bonds, including any necessary reinsurance agreements, to the Contracting Officer, within ________ days, but in any event, before starting work.
(d) The Government may require additional performance and payment bond protection if the contract price is increased. The Government may secure the additional protection by directing the Contractor to increase the penal amount of the existing bonds or to obtain additional bonds.
(e) 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/.
(End of clause)
Alternate I (July2000). As prescribed in 28.103-4 , substitute the following paragraphs (b) and (d) for paragraphs (b) and (d) of the basic clause:
(b) The Contractor shall furnish a performance bond (https://www.gsa.gov/forms-library/performance-bond-other-construction-contracts" target="_blank">Standard Form 1418) for the protection of the Government in an amount equal to ______ percent of the original contract price.
(d) The Government may require additional performance bond protection if the contract price is increased. 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.