Overview
This section prescribes the policies and procedures for requiring performance and payment bonds in non-construction contracts, such as those for supplies or services. It establishes that while such bonds are generally not required, they may be utilized in specific high-risk scenarios to protect the Government's financial interests.
Key Rules
- General Prohibition: Agencies should generally not require bonds for other than construction contracts; they are only permitted under specific exceptions.
- Timing of Submission: Contractors must furnish required bonds before receiving a "notice to proceed."
- Post-Award Restrictions: Bonds cannot be required after a contract award if they were not in the original solicitation, except in cases of contract modifications.
- Performance Bond Criteria: These may be required for contracts exceeding the Simplified Acquisition Threshold (SAT) if the contract involves Government property/funds, asset transfers/mergers, substantial progress payments, or dismantling/demolition services.
- Payment Bond Limitation: A payment bond is only required if a performance bond is also required and it is deemed in the Government's interest to protect suppliers.
- Responsibility Determination: The ability to secure a bond does not replace the Contracting Officer’s duty to independently determine contractor responsibility under FAR Subpart 9.1.
- Mandatory Clauses: Contracting officers must use FAR clause 52.228-16 to specify bond amounts and the timeline for return (typically 10 days).
Practical Implications
- Contractors should anticipate bond requirements primarily in high-risk service contracts, such as those involving the demolition of federal facilities or the management of expensive government-furnished equipment.
- Since bond premiums increase the total contract cost, the Government limits their use to avoid unnecessarily restricting competition or increasing prices for standard commercial items.