Overview
FAR 28.101 prescribes the policies and procedures for requiring bid guarantees, which serve as financial security to ensure a bidder will execute a contract and provide the necessary payment and performance bonds if selected. The section outlines mandatory requirements for construction, dollar limitations for guarantees, and specific protocols for handling noncompliance and technical documentation errors.
Key Rules
- Requirement Correlation: A contracting officer may only require a bid guarantee if performance or performance/payment bonds are also required for the contract.
- Bond Amounts: The bid guarantee must be at least 20% of the bid price, but it cannot exceed a maximum limit of $3 million.
- Construction vs. Other Contracts: While supply or service contracts can utilize various types of guarantees (including annual bonds), construction contracts typically require separate bid guarantees for each solicitation.
- Attorney-in-Fact Evidence: Any person signing a bid bond on behalf of a surety must provide a power of attorney. Failure to provide a signed and dated power of attorney at the time of bid opening is considered a matter of bid responsiveness and results in rejection.
- Noncompliance in Sealed Bidding: In sealed bidding, failure to provide the required guarantee generally requires the rejection of the bid, except for specific waivable circumstances (e.g., the bid is the only one received, or the deficiency is less than the difference between that bid and the next higher offer).
- Waiver Authority: The chief of the contracting office can waive the bid guarantee requirement if it is determined not to be in the government's best interest, such as for emergency acquisitions or sole-source contracts.
Practical Implications
- Fatal Technicalities: For contractors, errors in the power of attorney documentation are often "fatal" in sealed bidding; if the surety disavows the authority of the signer, the bidder cannot substitute a replacement or correct the error through the Certificate of Competency process.
- Risk Mitigation for Small Business: The 20% / $3 million rule provides a predictable ceiling for bonding costs, but bidders must ensure their bonding capacity is sufficient to cover the 20% threshold to avoid immediate disqualification.